Bills Digest No. 126 2002-03
Medical Indemnity (Prudential Supervision and Product
Standards) (Consequential Amendments) Bill 2002
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Medical Indemnity (Prudential
Supervision and Product Standards) (Consequential Amendments) Bill
2002
Date Introduced:
12 December 2002
House: House of Representatives
Portfolio: The Treasury
Commencement:
1 July 2003
Purpose
To make
consequential amendments to give effect to the proposals in the
Medical Indemnity (Prudential Supervision and Product Standards)
Bill 2002.
This Bill forms part of the Government s package
of reforms, announced by the Prime Minister in October 2002, to
address the problems being experienced by providers of medical
indemnity insurance in Australia. This Bill should be considered in
conjunction with the Medical Indemnity (Prudential Supervision and
Product Standards) Bill 2002. Further information regarding the
medical indemnity crisis and Medical Indemnity (Prudential
Supervision and Product Standards) Bill 2002 can be found in the
Medical Indemnity (Prudential Supervision and Product Standards)
Bills Digest.(1)
Item 1 of Schedule 1 of the
Bill amends the Australian Prudential Regulation Authority Act
1998 so that the secrecy provisions in that Act apply to the
Medical Indemnity (Prudential Supervision and Products Standards)
Bill once enacted.
Items 2 and 3 of the Bill amend
the Financial Sector (Collection of Data) Act 2001 so that
the Act applies to an entity that has provided medical indemnity
cover prior to 1 July 2003 other than by way of a contract of
insurance.
The Medical Indemnity (Prudential Supervision
and Product Standards) Bill 2002 states that providers of medical
indemnity cover to health care professionals must be authorised
under the Insurance Act 1973.(2)
Item 4 of the Bill inserts a
new subsection 12(3A) into the Insurance Act 1973 to
provide that the Australian Prudential Regulation Authority (APRA)
must refuse an application by a medical defence organisation (MDO)
for authorisation to carry on an insurance business(3)
if the circumstances, as set out in the Bill, exist. The Bill
states that if at the time that the MDO applies for authorisation,
it is liable or may become liable to pay for medical indemnity
claims made by insureds under arrangements that are not insurance
contracts (ie discretionary cover arrangements), APRA must refuse
the authorisation.
In effect, some MDOs may be required to
restructure their business arrangements (such as create a new
company) to ensure that the entity that applies for the
authorisation is free of liabilities for outstanding discretionary
cover claims. In some situations however, MDOs will already own
insurance companies that only issue contracts of insurance, and
therefore little restructuring will be required.(4)
Under the Insurance Act 1973, APRA and
its officers have general powers to require that insurers make
available to APRA information, books, accounts or documents for the
purposes of the Act. APRA has power to inspect, take extracts from
and make copies of the books, accounts or other
documents.(5)
The Insurance Act 1973 also gives
officers authorised by APRA power to enter an insurers premises so
that the regulator may search for, inspect, take extracts from and
make copies of the books of the body corporate. Authorised officers
may only do this once they have obtained the consent of the
occupier of the premises or they have obtained a warrant from a
Justice of the Peace authorising them to do this.(6)
Items 5 11 amend the
Insurance Act 1973 to vest APRA with the same information
gathering powers for the purposes of ensuring that there is
compliance with Part 2 of the Medical Indemnity (Prudential
Supervision and Product Standards) Act 2002.(7)
The Insurance Contracts Act 1984 sets
out rules that relate to the flow of information between insurers
and insureds and which govern the relationship between the insurer
and the insured.
Part IA of the Insurance Contract Act
1984 vests the Australian Securities and Investment Commission
(ASIC) with powers to administer the Act. For example, ASIC has
power to monitor complaints in relation to insurance matters,
collect statistics relating to the nature and volume of the insurer
s business and require that insurers provide it with documents that
relate to the insurance cover that is provided.
Items 12 17 of the Bill amend
the Insurance Contracts Act 1984 so that the powers to
administer the Act may also be used by ASIC in its administration
of Part 3 of the Medical Indemnity (Prudential Supervision and
Product Standards) Bill 2002 as enacted.
The provisions in the Insurance Contracts
Act 1984 that relate to information flows and the conduct of
insurers and insureds currently do not apply to the provision of
medical indemnity protection to health care professionals on a
discretionary basis.(8)
The Insurance Contracts Act 1984 will
apply to all forms of medical indemnity cover once the Medical
Indemnity (Prudential Supervision and Product Standards) Bill 2002
is enacted and commences operation. Medical indemnity cover
provided to health care professionals under the new regime will
need to be provided on a contractual basis and hence will fall
within the scope of the Act.
This Bill contains a small number of
consequential amendments to Commonwealth insurance legislation,
namely the Australian Prudential Regulation Authority Act
1998, Financial Sector (Collection of Data) Act 2001,
Insurance Act 1973 and the Insurance Contracts Act
1984.
The consequential amendments to these Acts are
for the purpose of giving effect to the Government s policy
regarding the prudential supervision of providers of medical
indemnity cover. The amendments contained within this Bill do not
raise any new broad policy issues relating to prudential regulation
of MDOs in Australia.
Endnotes
-
- Susan Dudley, Medical Indemnity (Prudential Supervision and
Product Standards) Bill 2002, Bills Digest No 121, 2002
2003, Department of the Parliamentary Library:
[http://www.aph.gov.au/library/pubs/bd/2002-03/03bd121.htm]
(13 March 2002).
- For further discussion, see ibid.
- Unless given an exemption under section 7 of the Insurance
Act 1973, an entity may only carry on an insurance business in
Australia if authorised to do so by APRA.
- For example, Australian Medical Insurance Limited (AMIL) is a
subsidiary of United Medical Protection Limited (UMP). AMIL
currently provides professional indemnity insurance policies
directly to doctors in conjunction with UMP s provision of
discretionary assistance for matters outside the scope of the AMIL
policy.
- Insurance Act 1973, section 115.
- ibid., section 115A.
- Part 2 of the Act specifies that providers of medical indemnity
cover for health care professionals must be general insurers and
they must supply the cover by way of a contract of insurance.
Further discussion on this can be found in, Medical Indemnity
(Prudential Supervision and Product Standards) Bill 2002, Bills
Digest No 121, 2002 2003: http://www.aph.gov.au/library/pubs/bd/2002-03/03bd121.htm].
- Section 8 of the Insurance Contracts Act 1984 states
that the Act applies to contracts of insurance and proposed
contracts of insurance the proper law of which is or would be the
law of a State or the law of a Territory in which this Act applies
or to which this Act extends.
Susan Dudley
20 March 2003
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 2003
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