Lynda Cox
Locum Insurance Manager
Lynda has worked in the insurance industry for 30 years. She is general manager of a leading locum insurance provider, having previously spent many years at a major UK life insurer, latterly as head of product development. Lynda is married with two teenage children and spends her spare time running, cycling or swimming in an attempt to stave off the effects of eating and drinking too much
What is it that you enjoy about your job? Dealing with people? Providing a service? Battling with the PCT? Balancing the books?
One thing it probably won’t be is dealing with insurance. But once you’ve made sure that the obvious is covered, such as the fabric of the building, you may also wish to look at other areas where a hole in your insurance could seriously damage the financial health of your practice. High on every practice manager’s list should be ensuring that, if your people can’t work, the practice isn’t out of pocket.
And if you were in any doubt about the need for this, consider what the General Practitioners Committee said earlier this year. In its Focus on Salaried GPs (revised July 2006), the British Medical Association (BMA) recommended that “practices should consider purchasing locum insurance to cover all of their salaried GPs (and possibly other staff as well).”
Doctors get sick too
The reason for this is clear – GPs get sick, just like the rest of us mortals. They also fly head-over-heels over their handlebars, trip down stairs and otherwise render themselves unable to work.
When a GP’s absence is planned – holidays, maternity leave and so on – colleagues can often provide cover.
What is more difficult is unplanned absence, particularly when it comes at an already busy period. And the answer to the dilemma usually is to bring in a locum.
There was a time when the PCT would make a contribution towards your costs, but this is far from the norm nowadays. So it’s the practice’s responsibility to cover the costs, as well as paying the individual who’s off work.
Although some GPs may have arranged personal cover, this would not reimburse the practice for locum costs. So, as identified by the BMA, it’s down to the practice. There are two routes open to you: one is income protection insurance, otherwise known as permanent health insurance, and the other is annual personal accident and illness cover, marketed as “locum insurance”.
Income protection
The cover is set up in the name of the practice and specifies each person to be covered. As this is long-term insurance, it covers each person to, generally, 65 years of age. Full medical information has to be provided up front in respect of each person. It’s possible that the insurer will need a report from the applicant’s GP and will send them for medical examinations.
Once all this information is in, the insurer decides whether and on what terms each person can be insured and will quote a premium. Premiums are based on the age and sex of the people covered and will usually be higher for smokers.
Since each person covered attracts a different premium, there are sometimes difficulties if the ages of the GPs covered vary widely. For example, the yearly premium for a person in his late 20s is likely to be half that of a person in his mid-50s, all other things being equal.
There are ways of reducing the premiums – for instance, by agreeing to reduce the circumstances in which the cover will pay out, or by taking a longer “waiting period” during which no benefits would be payable. Care should be taken, though, to ensure the cover is as comprehensive as you need it to be and that the wrong corners are not being cut.
Also, make sure you know whether premiums are variable or guaranteed. Take into account that “guaranteed” premiums tend only to be guaranteed for the first couple of years. Typically, a discount will be offered for groups of three or more GPs. Smaller practices would usually need to arrange individual cover for each person.
Premiums would usually be treated as a business expense of the practice, and would be therefore be tax deductible. If a claim were made, any payments made to the practice would be taxed as income but could be offset against the locum costs.
Locum insurance
Locum insurance is set up in a similar way to income protection: it’s in the name of the surgery, so the surgery receives any benefits paid out by the insurance.
At the outset, each person needs to answer some questions about health and pastimes. If there is anything problematic in the medical history, this is generally handled by putting a specific exclusion on the cover for that particular individual.
An example of this would be the GP who discloses a recent hernia. The insurer would probably want to exclude claims arising from this, but you should make sure the situation is reviewed each year. If there has been no recurrence for at least 12 months, it would be reasonable to expect the exclusion to be reviewed.
Premiums are not usually geared to age, sex or smoker status, so, for a given amount of cover, everyone’s premium is the same. It should also be possible to negotiate a discount for groups of three or more people from the same practice, but, generally, there are no restrictions on group size, and a “group” of one person would be acceptable.
Deciding between the two
And now it comes to the crunch: how to decide between these two types of cover (see Box 1):
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The fundamental difference between locum insurance and income protection is that the former needs to be underwritten annually. So, if there has been a deterioration in a person’s health since this cover was last renewed, it is possible restrictions will be applied or even, in extreme circumstances, that renewal will not be offered in respect of that individual.
Balanced against this is the cost. Locum insurance typically costs around two-thirds of the premium a person in their mid-20s would pay for income protection, and less than half what a person in their mid-50s would pay.
Striking a balance
One way to manage the cost is to treat the two types of cover as complementary. By this, I mean setting up your income protection cover with a 52-week waiting period, which should attract a significant premium saving, and running this alongside locum insurance.
For short-term illness, the locum insurance will step in, and, once an absence has become long term, the income protection comes into its own.
Whichever route you choose, remember that the cost you plan and manage is a far better prospect than the cost that spirals out of control.
