Australian Government issues fifth ACCC medical indemnity report
The Australian Government today issued the Australian Competition and Consumer Commission report monitoring medical indemnity insurance premiums, Medical indemnity insurance—fifth monitoring report—April 2008.
The report is the fifth to be produced in response to the Australian Government's announcement in October 2002 that the ACCC would monitor medical indemnity premiums to assess whether they are actuarially and commercially justified.
The report found that the premiums written in 2007–08 (2007 in the case of Australasian Medical Insurance Limited and QBE Insurance (Australia) Limited) were considered to be both actuarially and commercially justified for all six medical indemnity insurers.
The report also examined the actuarial and commercial justification of premiums within each jurisdiction and found that, based on the information available, jurisdictional relativities were justified.
The report will be available from the ACCC's website.
The ACCC's monitoring focuses on how premiums were derived by the six medical indemnity insurers that were operating as at 30 June 2007 from an actuarial and commercial perspective. The six insurers are Australasian Medical Insurance Limited, MDA National Insurance Pty Ltd, Medical Insurance Australia Pty Ltd, MIPS Insurance Pty Ltd, Professional Indemnity Insurance Company Pty Ltd and QBE Insurance (Australia) Limited.
The ACCC also considered consolidated information supplied by Avant Insurance which commenced operation on 1 July 2007 following the merger of the parent entities of AMIL and PIICA.
The ACCC's assessment of the actuarial justification of premiums considers the technical actuarial aspects of pricing. It examines the process adopted by medical indemnity providers to derive premium rates, the approach taken to construct those premiums, the level of detail used to support pricing assumptions and the breadth of issues taken into consideration (such as recent medical indemnity and tort law reforms).
The ACCC's assessment of the commercial justification of premiums considers the ability of medical indemnity providers to meet their commercial obligations to key stakeholders. It examines the impact on premium rates of APRA's minimum capital requirements that medical indemnity providers need to achieve to reach a fully capitalised position by 30 June 2008, as well as broader commercial obligations such as solvency targets and emerging surplus.
