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Double indemnity?

16 January 2012

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Simon Downing

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 Royal College of Nursing’s (RCN) recent announcement that it is to withdraw indemnity cover for general-practice nurses from 1 January 2012 has left many surgeries in a state of confusion as to the implications.

Much has been discussed on the subject, with snippets of information from different associations and medical defence organisations trying to explain what is happening and whom it will impact upon. To be honest it is still a little unclear, but the basis behind it all is that the RCN will no longer provide indemnity to nurses employed by a GP.

This change will not impact upon all practices the same way, since an individual doctor’s cover or group policy may well extend to cover the nurses, healthcare assistants, etc.

However, it is vital that this is checked first. If any practice nurse employees are engaged in extended role activities – such as nurse practitioners/prescribers – it is more than likely that they will not be covered and will need to be insured.

Previously, if a claim did occur for a practice nurse then the group cover or individual doctor’s cover would respond to this. But, as of 1 January 2012, a practice’s indemnity provider will no longer be able to recover any clinical negligence actions costs from the RCN.

Once practice nurse roles and liability issues have been established the question arises of who is going to pay for this. The problem here is that if the nurse requiring cover does not have it stipulated in their contract that they are responsible for acquiring and maintaining their own indemnity arrangements, the responsibility may lie with the practice.

As most practices have relied upon RCN cover for their nurses, they probably do not have this requirement and as such are now searching around for cover, worried about their nurses not being covered anywhere.

Let’s get one thing straight right from the start. The cost of providing indemnity cover has risen quite dramatically over the last few years. You only have to look at the double-digit percentage increase in premiums/subscriptions GPs and consultants in private practices have to pay. The RCN would not have been exempt from market forces.

When considering why a particular insurance cover, be it indemnity or any other, has been changed or withdrawn, it usually comes down to basic economics – more money is going out in claims/costs than premiums are coming in.

Effectively, four options would have been available to the RCN:

  •     Stop providing this type of cover.
  •     Increase the premiums/contributions.
  •     Reduce the level of cover being offered.
  •     A combination of points one and two.

So, how could the RCN decision affect practices/practice nurses and other staff?

It is all to do with ‘vicarious liability’. This is the assignment of responsibility for harm/damages caused by another person in either a negligence lawsuit or criminal act. Put simply: the employer of an employee who has injured somebody due to negligence while in the scope of their employment is vicariously liable for damages to the injured person.

This is why practices need to ensure they have cover in place to deal with vicarious liability. If you do not already have this cover for your practice, insurance policies are available to cover
this eventuality.

Taking the insurance risk yourself
Let’s be clear: ‘taking the risk yourself’ doesn’t mean starting an insurance company. It means paying a lower premium for your insurance but being bound by restrictions in the cover. Examples include: taking a higher policy excess with your surgery policy; a longer deferred period with the practice
locum policy; and, finally, defer claiming.

By taking any of the above you are acting as your own insurer for the difference between the normal and the additional restrictions imposed. You do, however, pay a cheaper premium. But is it worth it, or does it lead to more problems and financial loss?

Higher policy excess
The easiest one to deal with is the surgery’s property insurance. Go for an increased policy excess of, say, £250, where the normal policy excess is £100 and get a small percentage decrease in your premium. This is very simple to calculate: you receive a discount of £x amount on the premium you would normally pay, although you will have to pay an additional £150 in the event of a claim.

Deferred period for locum insurance
This can be slightly more complicated and, in certain circumstances, costly. Most practices ‘tie in’ their locum insurance with their practice agreement; as such, the period before the locum insurance ‘pays out’ (the deferred period) is established by how long the practice will pay for a locum in the event of incapacity/absence. By having a longer deferred period the premium will reduce.

But is it worth it? Here is an example. The practice locum policy covers all four partners for a benefit of, say, £2,000 per week each (it could be higher or lower, but the principle is exactly the same) with a four-week deferred period. If they extend the deferred period to, say, 13 weeks they would get a discount of approximately 40%. This would be a saving of approximately £1,200 a year. Sounds good so far? Let’s just see how this works out.

You are not going to like this. At risk are four GPs at £2,000 per week. The practice will pay for the first four weeks of incapacity. The deferred period chosen to make the £1,200 saving is 13 weeks. Let’s assume that one GP is off with depression (recent statistics show this condition to provide the highest number and value of claims) for six weeks (which is being generous). The practice will have to pay the difference: two weeks at £2,000 per week = £4,000. If the time off work were eight weeks, the cost would be £8,000 – all for the saving of £1,200! What happens if two or more GPs are off at the same time? Let’s not go there!

Defer claiming
Recently I came across another way of reducing your locum insurance premium, which, at face value, appears too good to be true. Basically the practice has to pay the ‘first claim’ (being their own insurers) and then the locum insurer picks up any other claim(s).

This is fine so long as the premium discount you receive is greater than the cost of the claim (taking into account the policy excess period – see above). Hope that you have got your crystal ball in good working order – you are going to need it if making this judgement.