ACCC medical indemnity report issued

The Australian Government today issued the Australian Competition and Consumer Commission report monitoring medical indemnity insurance premiums, Medical indemnity insurance—sixth monitoring report—April 2009.

The report is produced after a Government request to monitor medical indemnity premiums to assess whether they are actuarially and commercially justified. It is the final ACCC medical indemnity insurance premium report.

The ACCC found that the premiums written in 2008–09 (2008 in the case of Avant Insurance Limited and QBE Insurance (Australia) Limited) were both actuarially and commercially justified for all five national medical indemnity providers.

The report also examined the actuarial and commercial justification of premiums within each State and Territory and found that, based on the information available, relativities were justified.

The ACCC's monitoring focuses on how premiums were derived by the indemnity insurers that were operating as at 30 June 2008 from an actuarial and commercial perspective. The insurers are Avant Insurance Limited, MDA National Insurance Pty Ltd, Medical Insurance Australia Pty Ltd, MIPS Insurance Pty Ltd, and QBE Insurance (Australia) Limited.

The assessment of 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 commercial justification of premiums assessment 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.

The ACCC's assessment of the actuarial and commercial justification of jurisdictional premium relativities involves an assessment of the extent and level of analysis undertaken to confirm or modify existing premium relativities. This also involves an assessment of the extent insurers took into account jurisdictional tort law reforms.