nottheaverageactuary

Actuarial news and views from Cape Town and beyond

Lose-lose situation as premiums for medical malpractice cover become unaffordable?

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Medical malpractice cover, a type of liability insurance, is something Shivani touched on in this week’s lecture and a nice link between medical schemes and next week’s topic of general insurance.

Professional indemnity covers the insured for any compensation owing to a third-party as a result of negligence in the provision of a service. In the case of medical malpractice, this cover may include any legal expenses incurred in defending allegations as well as cover for both medical equipment and medicines prescribed.

An article in the most recent issue of Personal Finance highlights the current rise of medical malpractice claims and cites increasing awareness of rights through the CPA; better litigation; tighter economic times where people are more inclined to “look for money” and global trends as possible reasons for the increase. It is not only the frequency of claims that is increasing but also the size of claims as a result of growing medical costs and inflation.

In 2013, South Africa saw the highest payout to date of R 25 million for medical malpractice and with all professionals at risk of making a mistake at some point in their career, it is easy to see why so many medical practitioners consider professional indemnity to be essential.

This article, “High insurance costs scaring off specialists”, speaks of the effect that rising insurance premiums is having on the specialities that upcoming doctors are choosing to pursue as well as existing doctors’ abilities to continue working in the private sector.

While doctors are struggling to afford these expensive premiums, it would seem that the insurance companies who are taking on these high risks cannot afford to charge any less – given the context of the increasing frequency and size of medical malpractice claims.

An article by Aon South Africa argues that at the end of the day consumers are going to be most hit by the severity of this situation. Currently, some doctors will admit to ordering more tests than necessary for their patients with the sole purpose of limiting their liability should anything go wrong. This results in additional costs to the patient and while increasing indemnity premiums push upcoming doctors out of the high-risk specialities, consultations in these fields are also becoming more and more expensive.

The article goes on to suggest the only way to make this form of liability insurance both sustainable for the providers and affordable for practitioners is in the introduction of legislation which limits the amount that an injured party can claim.

Can anyone see alternative solutions to this problem? Should insurers be trying harder to find other ways to pass on the high risk faced in covering medical malpractice or should other parties be taking the brunt of this situation?

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3 thoughts on “Lose-lose situation as premiums for medical malpractice cover become unaffordable?

  1. This article is slightly outdated (October 2012) but confirms the above solution of reforming legislation:

    http://www.nortonrosefulbright.com/knowledge/publications/71673/dealing-with-the-increase-in-medical-malpractice-claims

    The article outlines specific reforms that could be introduced. Amongst others, they suggest introducing legislation to cap general damages (pain and suffering, emotional distress, scarring and disfigurement) and to cap compensation for loss of earnings.

    The article suggests that the basis of the Road Accident Fund (RAF) could be used when deciding how to apply a cap. It mentions that similar reforms have been introduced in some states in Australia and the USA.

    Perhaps the examples of the RAF, Australia and the USA could be used as a “benchmark” to introduce changes in the South African legislation?

  2. The article, “Professionals Take Cover”, which I read in the most recent issue of Personal Finance (unfortunately there is no online version) touched on a similar point to the link you just posted. It cited, amongst other reasons, that the rise in the number of lawsuits against professionals could be owing to lawyers having to look for “new sources of income” after finding themselves out of work when the RAF Act changed in 2008. Makes one wonder to which other fields displaced lawyers might have to seek work if medical malpractice law did see a change in legislation!

  3. Although medical malpractice rates have dropped considerably in the U.S., not every State has felt the love evenly. In 2010, for example, six states accounted for over half of all the money spent in medical malpractice law suits, and one fifth of all the money spent on medical malpractice was spent on suits in New York alone, a state with only about one-sixteenth of the U.S. population. It would be a reasonable assumption to say the cover costs will decrease as few doctors get sued every year.

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