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Beware of ‘small print’ premiums

27 June 2011

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Policy Director
Medical Insurance Consultants

Simon has been MIC’s Policy Director for the past five years and is responsible for ensuring its healthcare insurance services meet the needs of the evolving healthcare sector

The need to cut overhead costs in medical practices is well documented, particularly when it comes to arranging practices’ insurance policies.

There now seems to be a trend to reduce the premiums that are paid by ‘shopping around’ and playing one insurer off against another (“Can you beat the premium that ‘XYZ’ has just offered me?”). This does, however, have its downside. In order to cut premiums, there is a possibility that practice managers are not getting the cover they think they are getting. They may not be comparing ‘apples with apples’.

The question is: how do you know? As with all insurance policies, it is only when you put in a claim that you really find out. No matter how many verbal reassurances the practice may have had, the claim is based on the cover stated in the policy documents. The insurance provider may not have specifically told the practice that this is different to their previous cover, but have they provided sufficient information about the insurance they are offering for the practice to make an informed decision?

Most medical practices are classified as ‘commercial’ under Financial Services Authority guidelines. What is assumed under this classification is an increased level of knowledge and understanding of the insurance that practices are requesting. This means that practice managers are advised to read carefully what it is they are accepting, but if there are significant conditions or exclusions that would affect the practice, these should be outlined.

Below are just a few genuine examples of instances where the practice involved discovered that their insurance policy did not, as they had believed, cover them after all.

Surgery insurance
The general contents of a medical practice are insured, and the practice manager has created an inventory of all the insured items. In the reception area, a video player and monitor are used as information tools to provide information for patients. Both the player and monitor are installed on a stand attached to the wall, some 7-8ft off the ground. So far, so good.

When the evening surgery is finished, a receptionist notices that both the player and monitor are missing. None of the staff or GPs has moved them – so it must have been a patient who has stolen them. The police are notified and the practice manager fills out the insurance claim form, only to be told some days later that the insurance company will not be paying the claim.

The reason the non-payment is simple: walk-in theft was not covered in the practice’s insurance policy; theft would only have been covered where there had been forceable entry. To add to the practice manager’s annoyance, he also discovers the policy excess is £250, while he had asked for a like-for-like quotation (meaning a £100 excess). The insurer has a standard £250 excess – this would have been on the quotation, but it is down to the client to take note of. By not covering ‘walk-in theft’ and having a £250 excess, the practice premium was cheaper.

Locum insurance
Dr A is fed up, as he has recently been unable to work due to a bout of depression that lasted for six weeks. He is covered under the practice group’s locum insurance policy, which covers his partners and practice manager as well.

Unfortunately, when Dr A was included in the group policy he failed to declare that he had suffered from episodes of depression in the past. The practice manger submits the claim, only to be told that the claim will not be paid as Dr A had failed to disclose parts of his medical history – commonly called ‘non-disclosure’ by insurers.

Dr A is introduced to another insurer, who confirms that they will insure him and provide him with standard terms. In Dr A’s eyes, this means that his cover is total – depression is covered. The sting in the tail is that this company’s “standard terms” have an exclusion for any pre-existing condition – some companies operate a “cover all exclusion” while some operate a “timed based exclusion”.

Simply put, under a “cover all exclusion” the insurer will not cover any pre-existing condition, and a “timed based exclusion” is based on whether the insured party has been unable to work for X number of days within the last X number of months/years because of their condition. As you will have already guessed, the more the insurer can exclude, the cheaper the premium.

Lessons to be drawn
In both instances, the assumption was that the correct cover was in place and that a claim could be made. What can practice managers do to stop this happening?

First, deal with a company that is used to dealing with medical practices: their reputation is on the line. If they fail to provide you with the correct cover or provide you with a bad service, it is very likely that other practice managers will hear about any problems.

Second, make sure that the insurance policy has been designed for medical practices. A few years ago, I came across a so-called “Surgery Buildings and Contents” policy that included cover for slot machines!

A surgery policy should cover elements that you think are essential, such as buildings, contents (all risks), medicine bags, drugs stock (including refrigerated), employer and public liability, and – don’t forget – accidental damage. A high proportion of practice claims relate to accidental damage, so a policy without this cover will be cheap, but also not very comprehensive.

Even though you may have been told that the cover is what you have requested, get a copy of the policy wording from the intended insurer before you take out the cover. Initially, look for the sections that deal with exclusions and definitions. If you have any questions or you would like clarification, speak to the insurer – but make sure that you get the responses in writing.

There are differences between buying cover that isn’t quite what you thought it to be and being deliberately misled to believing that cover is there for something that isn’t. Questions to ask are: have you been given the information on the policy to be able to make an informed decision? Did you ask questions about certain aspects and read what was given to you?

If you feel you have been misled then you should complain to the insurer/broker who sold you the policy – they should provide you with their complaints procedure, outlining what will be done and when. If you are not satisfied with the outcome, then you may be eligible to refer your complaint to the Financial Ombudsman Service (FOS) – see Resource – to investigate.

Remember: the devil is in the detail.

Financial Ombudsman Service