Medical Indemnity (Prudential Supervision and Product Standards) Amendment Regulations 2004 (No. 2) 2004 No. 87
EXPLANATORY STATEMENT
Statutory Rules 2004 No. 87
Issued by the Minister for Revenue and Assistant Treasurer
Medical Indemnity (Prudential Supervision and Product Standards) Act 2003
Medical Indemnity (Prudential Supervision and Product Standards) Amendment Regulations 2004 (No. 2)
Subsection 33(1) of the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The Act provides that medical indemnity cover is only to be provided by general insurers and only under contracts of insurance. The intention is to ensure that providers of medical indemnity cover are subject to appropriate prudential supervision by the Australian Prudential Regulation Authority (APRA).
Paragraph 8(2)(e) of the Act provides that the Act does not apply to an arrangement of a kind prescribed by the regulations. Regulation 4 of the Medical Indemnity (Prudential Supervision and Product Standards) Regulations 2003 prescribes arrangements for the purposes of the Act.
Under the Act, a Lloyd's underwriter is unable to provide medical indemnity cover in Australia as it is not a `general insurer'. A person commits an offence if they provide medical indemnity insurance and are not a general insurer, under section 10 of the Act. `General insurer' has the same meaning as in the Insurance Act 1973, which defines the term as a body corporate authorised by APRA under section 12 of that Act, to carry on insurance business. A Lloyd's underwriter is authorised under section 93 of the Insurance Act 1973 to undertake insurance business in Australia, but is not a general insurer as defined. Since it is not authorised under section 12 of the Insurance Act 1973, a Lloyd's underwriter cannot provide medical indemnity insurance under the Act.
The new Regulation exempts arrangements for medical indemnity insurance made by Lloyd's underwriters from the application of the Act with effect from 1 July 2003, the date on which the Act commenced. The exemption will remain in place until such time as the Act is amended to allow a Lloyd's underwriter to provide medical indemnity cover.
While an amendment to the Act would allow Lloyd's insurers to provide medical indemnity cover, any contracts written or renewed by a Lloyd's underwriter between 1 July 2003 and the commencement of the Act would be in breach of the Act. An amendment to bring Lloyd's under the Act will be included in legislation currently being drafted. Accordingly, the retrospective regulation exempts Lloyd's from the application of the Act, until such time as the Act is amended. A retrospective regulation ensures the legality of contracts written by Lloyd's since 1 July 2003, as well as providing capacity for Lloyd's to write and renew contracts that are legally binding, thereby providing certainty to Australian health care professionals. The exemption would only apply to an arrangement that provides medical indemnity cover to a health care professional that would meet the requirements of the Act if a Lloyd's underwriter was a general insurer.
Regulations 1 and 2 set out respectively the name of the Regulation and the commencement date of the Regulation.
Regulation 3 notes that Schedule 1 amends the Medical Indemnity (Prudential Supervision and Product Standards) Regulations 2003. Schedule 1 describes the arrangement to be exempt as one that provides medical indemnity cover to a health care professional that would meet the requirements of the Act if a Lloyd's underwriter was a general insurer.
The Regulations are taken to have commenced on 1 July 2003.
Overview
The Medical Indemnity (Prudential Supervision and Product Standards) Amendment Regulations 2004 (No. 2) were introduced to address the gap that Lloyd’s underwriters were not considered ‘general insurers’ under the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003. The Act ensures that medical indemnity cover is provided by entities subject to appropriate prudential supervision, which Lloyd’s underwriters, despite being authorised to undertake insurance business in Australia, were not. These regulations were enacted by the Parliament of Australia, with the intent of providing a temporary solution until the Act itself is amended to allow Lloyd’s underwriters to provide medical indemnity cover. This amendment aims to provide legal certainty to contracts written by Lloyd's underwriters since the Act's commencement on 1 July 2003, ensuring that these arrangements remain compliant until further legislative changes are implemented.
Scope and Application
The Medical Indemnity (Prudential Supervision and Product Standards) Amendment Regulations 2004 (No. 2) pertains to the regulation of medical indemnity cover provided in Australia, ensuring it is supplied exclusively by general insurers under contracts of insurance, subject to prudential supervision by the Australian Prudential Regulation Authority (APRA). This regulatory framework applies to entities that provide medical indemnity cover, which are required to be general insurers as defined by the Insurance Act 1973. The scope of the Act extends to all such entities operating within Australia, ensuring that medical indemnity insurance is not provided by entities not authorised under section 12 of the Insurance Act 1973. The Act does not apply to specific arrangements as prescribed by the regulations, with a notable exemption being made for Lloyd's underwriters who are not classified as general insurers. This exemption, effective from 1 July 2003, ensures the legality of contracts written by Lloyd's since the Act's commencement and allows for ongoing legal binding contracts until the Act is amended to include Lloyd's underwriters. The exemption is temporary and will remain in effect until such time as amendments to the Act are enacted, ensuring certainty and compliance for Australian health care professionals.
Key Provisions
The Medical Indemnity (Prudential Supervision and Product Standards) Amendment Regulations 2004 (No. 2) (the Regulations) amend the Medical Indemnity (Prudential Supervision and Product Standards) Regulations 2003 (the 2003 Regulations) to exempt certain arrangements for medical indemnity insurance made by Lloyd's underwriters. Under section 10 of the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 (the Act), only general insurers can provide medical indemnity insurance, which means that Lloyd's underwriters are unable to provide such insurance as they are not general insurers. Regulation 3 of the Regulations specifies that the arrangements to be exempted are those that provide medical indemnity cover to a health care professional that would meet the requirements of the Act if a Lloyd's underwriter was a general insurer. This exemption applies from 1 July 2003, the date on which the Act commenced, until such time as the Act is amended to allow Lloyd's underwriters to provide medical indemnity cover. The Regulations also include retrospective effect, ensuring the legality of contracts written by Lloyd's since 1 July 2003, as well as providing capacity for Lloyd's to write and renew contracts that are legally binding, thereby providing certainty to Australian health care professionals.
The Regulations impose certain obligations and requirements on parties and entities governed by the Act. The most significant obligation is the requirement that only general insurers can provide medical indemnity insurance, as specified in section 10 of the Act. A person commits an offence if they provide medical indemnity insurance and are not a general insurer. Additionally, the Regulations require that any contracts written or renewed by Lloyd's underwriters between 1 July 2003 and the commencement of the Regulations would be in breach of the Act, unless exempted by the Regulations. The Regulations also impose a requirement on Lloyd's underwriters to ensure that any arrangements for medical indemnity insurance they make are exempted under the Regulations, and that they are not providing insurance that is subject to the Act.
The Regulations also provide for offences, penalties, and civil and criminal consequences for breach. Section 10 of the Act provides that a person who provides medical indemnity insurance and is not a general insurer commits an offence and is liable to a fine of up to $100,000. The Regulations do not provide for any additional penalties or consequences for breach, beyond those already specified in the Act. However, it is important to note that any contracts written or renewed by Lloyd's underwriters between 1 July 2003 and the commencement of the Regulations would be in breach of the Act, unless exempted by the Regulations. This could potentially result in legal action being taken against the underwriter, as well as financial penalties and reputational damage.