Insurance versus indemnity
Doctors are frequently bombarded with marketing information from commercial insurers (and other interested parties), proclaiming the supposed benefits of insurance over the flexible discretionary indemnity offered by not for profit, mutual organisations like MPS.
More than 260,000 healthcare professionals worldwide continue to choose MPS protection over insurance. If in doubt seek the advice and opinions of your colleagues.
Below are some of the most frequently asked questions on the issue.
Q1. What's the difference between mutual (not-for-profit) and commercial (profit-making) indemnifiers?
Commercial organisations are profit-focused, their priority is to protect the financial interests of shareholders. In a mutual organisation the priority is the interests of the members. The wording of any insurance policy will reflect the need to define (and thereby limit) what will be covered. The terms, conditions and exclusions contained in an insurance policy will be designed to minimise risk, thereby protecting profits and the interests of shareholders rather than the policy holder.
In contrast, MPS is run purely for members and is not profit-driven.
Q2. Does a contract of insurance automatically provide more certainty than discretionary indemnity?
No. The extent of the certainty will depend entirely upon the nature of the contract and its detailed wording. This determines what is included and what isn't, what exclusion clauses apply, what the terms and conditions of cover and claims are, and what the limit on cover is for each claim.
Occurrence-based indemnity provided on a discretionary basis offers greater flexibility, and enables assistance (and compensation) to be given in circumstances which would not be covered within a contractual insurance situation. Anyone who has ever made a claim on an insurance policy for property, travel or permanent health will know that commercial insurance companies assess the claim against the carefully worded clauses of the policy. Although this is sometimes referred to as 'small print' it can have a very big impact on a claim when it is rigidly enforced.
Q3. Can't a discretionary indemnifier just refuse assistance?
For commercial reasons, insurance companies will tend to use arguments such as this to undermine confidence in discretionary indemnity. Such an argument, while compelling at first sight, ignores the fact that an insurer can and will refuse cover if the circumstances fall outside the terms of the policy, or if the policyholder fails to comply with the conditions of the policy. Beware the bold headline statement accompanied by a tiny footnote which normally reads 'subject to the terms and conditions of the policy'.
Any discretionary organisation that refused legitimate claims from its members would not remain in business for long. No patient who has suffered harm as a result of clinical negligence on the part of an MPS member has gone uncompensated as a result of MPS exercising its discretion negatively.
It is also unlawful for discretion to be used unfairly, randomly, perversely, irrationally, or with improper motives, and discretionary organisations are subject to legal challenge in the courts. The discretion must be used in accordance with the objectives set out in the Memorandum and Articles of Association.
Q4. What's the difference between the occurrence-based indemnity from MPS and the claims-made cover offered by commercial insurance?
Put simply, occurrence-based indemnity can meet claims that arise from treatment carried out by a member, regardless of when the claim is brought, without the need for any further payment to be made, and can protect the member in perpetuity.
Claims-made insurance only covers you for the period for which the policy is in force. Claims from the past may have to be covered by the payment of an additional premium or run-off cover. If run-off cover is not taken out in these situations, the practitioner, their estate and patients with a retrospective claim will not be protected. This is in effect a 'hidden' cost and risk of insurance.
Q5. Discretionary mutual organisations are not regulated in the same way as insurance companies. Are they less secure?
Regulation of commercial insurers is no guarantee of security. The failures of Equitable Life, and of the Independent Insurance Company, are recent examples here in the UK, both having been subject to FSA regulation up to the moment of their demise.