Dawn of a new age of indemnity

indemnityKevin Culliney takes a look at the indemnity provisions reform and discusses what we can expect from this.

Just before Christmas the Secretary of State for Health and Social Care, Sajid Javid, announced that in accordance with the recommendations of the independent inquiry into the issues raised by former surgeon Ian Paterson, the government would be bringing forward proposals for reforming the provision of indemnity in 2022.

Recommendation 10 of the independent inquiry stated: ‘We recommend that the government should, as a matter of urgency, reform the current regulation of indemnity products for healthcare professionals in light of the serious shortcomings identified by the inquiry and introduce a nationwide safety net to ensure patients are not disadvantaged.’

Here we take a brief look at what shape this reform may take. As well as what it may mean for dental indemnity.

Background

For over 125 years the medical and dental defence organisations have provided indemnity to medical professionals.

The MDDOs do not provide insurance. Rather they offer membership to clinicians with the right to request indemnity.

This has been provided on an entirely discretionary basis. But by and large the MDDOs have done a good job of protecting the profession.

Around 25 years ago insurance companies and brokers started to offer insurance as an alternative to discretionary indemnity.

Insurance comes with a written contract and a lot of regulation. Today around 25% of dentists in the UK receive protection by insurance rather than MDDO membership.

For 25 years then, insurance and MDDO membership have existed as alternatives for clinicians with the majority of clinicians electing to stay with the model with which they were most familiar and to a large extent the indemnity provider who approached them while at medical or dental school.

Over time insurance has gained ground and has even introduced ‘occurrence’ based insurance. A leading example of this is Densura in the dental indemnity market.

Royal and Sun Alliance backs Densura. It was designed by dentists providing a comprehensive range of indemnity services with the policyholders obtaining advice and support from 10 dentally qualified and legally trained practising clinicians in the event of a patient complaint.

Paterson

In 2017 Ian Paterson, a breast surgeon working in the NHS and at Spire hospitals in the West Midlands was convicted of 17 counts of wounding with intent and three counts of unlawful wounding, although he had negligently treated over 1,000 patients.

As a criminal act, Paterson’s indemnifier exercised their discretion not to indemnify the surgeon. They avoided paying over £40m in damages (the NHS paid over £37m in their settlement).

It is important to point out that had Paterson been indemnified by an insurance company, the insurer would also have declined cover. Insurance indemnity does not extend to cover deliberate or criminal acts.

As a result of the indemnifier’s decision, injured patients had no recourse to compensation. Paterson was essentially a man of straw.

In the end they turned to the private hospital where Paterson operated. Spire Hospitals agreed to pay in excess of £47 million. Spire pursued recovery of this sum from their own indemnity insurers.

Given the severity of the case and the number of patients involved, the government instituted a formal inquiry. This was led by the Bishop of Norwich and, in February 2020, the enquiry delivered its report.

The report recommends investigating the whole issue of indemnity provision. Procedures should be put in place to ensure that, in future, patients would not be left exposed as they had been in this case.

In 2019 the Department of Health conducted a full consultation on the future of indemnity. With results expected in 2020.

Covid-19 disrupted the process and the results and any actions fell dormant, until now.

The future of indemnity

So what can we expect from this reform?

We have yet to see any detail, but based on the recommendations of the inquiry we should expect to see that discretionary indemnity will become a thing of the past.

It is just no longer acceptable that an indemnity provider, faced with a large claim can elect not to indemnify a doctor or dentist.

We believe the MDDOs will have two years to put their affairs in order and become providers of regulated insurance.

This is a major change. It will bring the MDDOs under the regulatory regime of the Financial Conduct Authority.

This will have cost implications. The chancellor will impose Insurance Premium Tax, currently 12%. As anyone working in the insurance industry knows, regulation is expensive.

We expect this to add an additional 6-8% to the MDDO’s cost.

On the positive side, clinicians will finally have contractual certainty of cover. It will result in the disappearance of discretion, and introduce proper regulated insurance with a right of recourse if unhappy.

Most importantly they will also have certainty around solvency as the MDDOs convert to insurance companies.

What else can we expect from reform?

To quote Roger Daltry of the Who: ‘We won’t get fooled again’.

Paterson shone a light on the gaps in indemnity provided by both the MDDOs and the insurance market.

A criminal clinician or even a clinician who forgets to renew their indemnity and slips a provider’s regulatory and governance net, can leave an injured patient without recourse to compensation. This is unacceptable.

Elsewhere a dentist may find him or herself uninsurable by a run of claims. They may require some supervision or retraining. But should we exclude them from practice when we are so short of doctors and dentists?

The answer to this, and it was raised by Densura in our response to the initial consultation, is a form of Risk Pool, funded by all insurers participating in providing medical and dental indemnity.

So what?

This question is really up to each individual clinician.

Change is coming, it is material and may affect, not only any future liabilities but also the past where one might assume that clinicians have protection.

Cost is a factor. But by creating a level playing field with the MDDOs we suspect changes will attract new market entrants by the opportunity. A strong-regulated environment will create price competition and drive up the level of service.

There is a new future for medical indemnity. Given its importance, it will pay to tune into the detail over the coming months. And of course seek advice from those leading the change.


For more information visit densura.com.

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