Medical negligence is regularly making headlines and pushing up claims, forcing many insurers out of the market. But change is on the way and those who have stayed in may benefit. Bob O'Connor reports
The growing threat of medical negligence to the insurance industry was brought sharply into focus last month when Australian doctors and surgeons had to cancel operations because a leading insurer had asked to be put into liquidation. The company, United Medical Protection, provided cover for 50% of Australia's doctors and the outcry following the debacle has forced the government to consider a long-term solution to the problem
Far from being a problem isolated on the other side of the world, medical negligence is causing headaches in the US and in the UK. Botched operations, bungled lab tests and bad diagnoses are the regular stuff of headlines. Meanwhile, patients, who once revered their doctors, are increasingly inclined to challenge them, both in the surgery and in the courtroom. The possibility of being sued for negligence is now at the back of every doctor's mind.
Reynolds Porter Chamberlain partner Clare Jaycock, who is head of the firm's health law department, says that expectations of patients are getting higher. When something goes wrong, she says, people are more likely to look for someone to blame rather than accept it as bad luck. The only way to stem the rise in claims, Jaycock says, would be for the creation by the government of a no-fault compensation scheme. While this seems a remote possibility now, the government may include it as an idea in its medical negligence White Paper which was promised for early 2002. It has yet to be issued.
When health secretary Alan Milburn first promised the White Paper, in July 2001, he said that the current system was both too slow and too expensive. Milburn cited a study by the National Audit Office that said clinical negligence cases in England were taking an average of more than five years to resolve. Often, the report said, legal costs exceeded damages.
The Association of British Insurers (ABI) is lobbying for accurate compensation costings and a focus on rehabilitation. Alistair Kinley, deputy manager for liability at the ABI, says the institute would like to see clear costings and justifications for any proposals to change the way compensation is calculated.
He adds that the institute is pressing the government for greater provision of rehabilitation for both clinical and non-clinical injuries. The ABI, Kinley says, also endorses suggestions from the government that lump sum payments to victims be replaced by structured settlements and annuities. "We would like to see that happen more broadly," he says.
If medical negligence is allowed to run away unchecked, as it has in the US, insurers will turn their backs on the business. That's what happened last year when St Paul pulled out of medical negligence cover in the US and the rest of the world.
David Bevan, general manager of St Paul, says St Paul's losses in the US medical negligence market fed concerns at the top of the company that these woes might repeat themselves on an international scale. "So we got carried along with that decision," he says.
St Paul, Bevan says, was on course to write £10m in medical negligence premiums in the UK this year. Most of the business, he says, was coming in from doctors and dentists. He says: "We took the view that we could probably enter the market for the lower-hazard end on the basis that GPs had really been subsidising the surgeon, or the higher-hazard, end of the market."
While St Paul pulled out of the UK market last year, there is no crisis yet, say industry experts. "I don't think there's any crisis providing medical indemnity for doctors in the UK," says Dr Michael Saunders, chief executive of the Medical Defence Union, the mutual that insures British GPs and surgeons.
The main reason, Saunders says, is that the two areas of greatest concern, obstetrics and brain damage, are largely covered by NHS indemnity. "From our point of view, [NHS indemnity] is a major stabilising factor," Saunders says.
The high level of claims against the NHS - now running at £4.4bn a year - is raising concerns about the drain on the public purse. The NHS indemnity covers corporate failures rather than the actions of individual doctors, who must buy insurance for their NHS and non-NHS work. Corporate lapses, which would not be blamed on individual doctors, might include the failure of a nursing staff to administer the appropriate drugs or a patient's fall from a trolley.
The UK private market is estimated to be worth hundreds of millions of pounds a year in premiums. And, despite the withdrawal of St Paul's, other insurers, including QBE, are understood to be looking at the market as an opportunity.
Saunders says that any decision by other insurers to come into the market would depend on the state of the insurance cycle. He says that it does not look particularly attractive at the moment. But he does not rule out the arrival of new entrants in future years.
The MDU is the largest of the mutuals that provides medical negligence insurance in the UK. Saunders estimates the MDU's UK market share at 55% to 56%. Also in the market are the Medical Protection Society and the Medical and Dental Defence Union of Scotland. The Medical Protection Society has a large overseas membership, particularly in the former British Empire. The Medical and Dental Defence Union of Scotland dominates the Scottish market.
An MDU policy typically costs a GP about £3,300 a year for negligence cover. The policy is underwritten by Zurich Financial Services. MDU members in Ireland are insured by the Eagle Star brand, although from 1 July, the Irish government will underwrite all negligence cover. In addition to the insurance, the MDU also provides a medical-legal help line and assistance with disciplinary matters.
MDU premiums charged to hospital consultants vary according to their income and the level of risk associated with their specialities. Saunders says that a high-earning plastic surgeon, for instance, could expect to pay about £30,000 annually for cover. A low-earning geriatrician might pay about £500.
While British doctors are not facing huge, American-style lawsuits yet, they are seeing a steady rise in the price of insurance. Saunders says premiums have been increasing by between 8% and 14% a year, well above the rate of inflation.
He cites the increase in claims frequency and the lowered expectations that are being applied to the likely performance of investments. If lump sums are expected to generate lower returns in the long run, the reasoning goes, the courts are likely to make larger awards. The courts are also basing their judgments on the lengthening of life expectancies. A big factor in this calculation, Saunders observes, has been the improvement of overall medical care.
Tracy Head, a partner with law firm Davies Lavery, says legal expenses insurance, often contained in household policies, is often used to fund medical negligence lawsuits. This provision can be added to a policy for a nominal fee. As more people become aware of this avenue, Head says, insurers may tighten up on the conditions on household policies.
Head says the need for expert witnesses in medical negligence lawsuits makes them "notoriously costly to run". Lawyers, for instance, might seek out expert advice before even taking a case on.
Jaycock does not foresee a situation where doctors will be unable to get cover. But she suggests the price of insurance could rise to the point where some doctors may decide working in private medicine would be too expensive.
Jaycock has seen no evidence that underwriters are looking to bring in restrictions on negligence policies. She says such restrictions would be difficult to impose and could leave doctors dangerously exposed.
Saunders does not see anything significant on the legislative horizon regarding medical negligence. He notes that the MDU has been trying to persuade the government to change the law which allows people who are damaged in the NHS to claim compensation for future private care. Treating these patients in the NHS, he argues, would save substantial sums and enhance the NHS's rehabilitation services. N
Medical negligence can happen anywhere
Laura Touche gave birth to twins by emergency caesarian section in the private Portland Hospital, made famous by celebrity mothers such as Victoria Beckham, Nicole Appleton and the Duchess of York.
After surgery she suffered a brain haemorrhage and brain damage. She was rushed to the nearby NHS Middlesex Hospital, where she died after spending eight days in a coma.
Her husband Peter Touche claimed the standard of care at the private maternity hospital "did not even reach the minimum NHS standards of care".
He went to court to battle for a full inquest into the causes of his wife's death. Two High Court judges ordered that an inquest should be carried out and it was found that neglect by the medical staff had contributed to Laura Touche's death.
Anaesthetist Michael Kean admitted failing to monitor her blood pressure levels both during and after the operation.
She had not been given basic medical checks for two and a half hours after surgery, despite hospital procedures requiring post-operative patients to be checked every 15 minutes.