The calculation of the premium for medical indemnity insurance is complex. The premium depends on a number of factors including the number of patients, type of surgery and claims record. Outside of doctors’ control however is another factor – how much are medical indemnity providers having to pay in claims for the profession as a whole and for all medical practitioners.
While a doctor is hopefully unlikely to have a substantial claim, some claims can have claims running into multiple millions. If a patient is harmed and has to receive lifetime care then a Court will award compensation based on the cost of that care.
The value of a future lump sum loss is determined by the “multiplier/multiplicand” approach. The multiplicand is the annual loss the claimant is expected to suffer at today’s rate. The multiplier is calculated based on actuarial tables taking into account statistical data, categories of claimants, & risk characteristics as against the length of time such a loss will continue. The discount rate then adjusts the amount of compensation that a claimant will receive.
The Discount rate is set for a period of five years and the next review is due in January 2025. It currently sits at -0.25% which assumes the injured patient will lose out on any investment of their compensation over time and as a result, awards need to take this into account and be higher which affects indemnity providers as they have to pay out more.
The government actuary who will provide advice to the Lord Chancellor carried out the same exercise locally to the Isle of Man. The discount rate was revised from -0.25% to 1% in October 2023. This may be good news for indemnity providers as if the UK follow suit when the Lord Chancellor next reviews in January the discount rate may become positive meaning claims paid by Providers may be lower which should be reflected in lower premiums to all medical practitioners over time.
At Practition we will be lobbying Insurers to include any change announced early next year in their premium calculations for our doctor clients. If you have any questions or need further information, please don’t hesitate to reach out. We look forward to hearing from you and are here to assist in any way we can. Please feel free to call us on 0207 933 1430 or email Practition@lockton.com.
