Run Off Cover (ROC) and The Run Off Cover Scheme (ROCS) for doctors’ professional indemnity insurance

Medical indemnity insurance provides financial protection (to the extent set out in the insurance contract) to both medical practitioners and patients in circumstances where a patient sustains an injury (or adverse outcome) caused by medical misadventure, malpractice, negligence or an otherwise unlawful act. All medical practitioners are required to hold medical indemnity insurance in order to practice privately as a condition of their professional registration.

In May 2002, the largest Medical Defence Organisation (MDO) in Australia was placed into provisional liquidation, which resulted in a potential lack of indemnity cover for many medical practitioners. At this time, insurers were also experiencing increased claims costs, uncertainty about the way courts were determining negligence cases (increasing the risk in setting premiums), reduced profitability and a fall in investment returns.  Against this backdrop, the Australian Government announced in October 2002, a range of measures and schemes including premium subsidies, government assistance for high-cost claims and improved regulation of the medical indemnity industry.

Since 2002, the Australian Government has expended over $400 million to 30 June 2016 on the schemes . Expenditure for the 2016-2017 financial year was $62.1 million, across seven discrete schemes, all of which form part of what is now known as the Indemnity Insurance Fund (IIF).  The objectives of the Indemnity Insurance Fund (IIF) are to promote stability in the medical indemnity insurance industry, keep premiums affordable for doctors and ensure availability of affordable professional indemnity insurance for eligible midwives.

The Run-Off Cover Scheme (ROCS) is one of the 7 schemes.  It reimburses medical indemnity insurers for 100% of the cost of claims for doctors (plus a 5% claims handling fee) who have ceased private practice because of retirement, disability, maternity leave, death or if they stop working as a doctor in Australia. The ongoing costs of the scheme are met by the ROCS Support Payment, a levy on the premium income of medical indemnity insurers.

The objective of the ROCS is to ensure that once medical practitioners cease private practice (permanently or, in some limited cases, temporarily), there continues to be insurance to cover any claims relating to actions taken by the medical practitioner while they were practising privately (without the need for the medical practitioner to continue to hold medical indemnity insurance after they cease private practice). Under the ROCS the Commonwealth is essentially acting as reinsurer for claims arising after medical practitioners cease private practice.

In the year ending 0n 30 June 2016, ROCS Claims amounted to $2.6 million.  There were 82,472 contributing doctors to the ROCS levy as at 30 June 2016 and 14,034 eligible practitioners to lodge claims as at 30 June 2016. The cost of the levy premiums was $15.6 million in that year and the total ROCS levies and interest accumulated since inception as at 30 June 2016 was $284 million. An administration fee  of $1.6 million was paid to insurers in that year. Source

Under the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003 and related Regulations, an insurer must offer run-off cover to a medical practitioner who retires when they are under 65, on the same terms and conditions as their last cover (other than terms as to price).  In addition, the PSS contract provides that such cover must be offered to medical practitioners, that have held cover with the insurer (or the associated MDO) for 10 or more continuous years, for $50 or less.  After three years of not engaging in private medical practice, the practitioner becomes eligible for ROCS and is no longer charged for run-off cover.

ROCS ensures that eligible doctors get medical indemnity cover that is secure and free and based on their last cover. “Last cover” refers to the cover you had prior to a period in ROCS. It will usually correspond to a medical indemnity contract of insurance which was in place immediately prior to leaving private practice.

The ROCS cover that medical indemnity insurers are obliged to give to eligible doctors is provided on the same terms and conditions, and for the same range of incidents, as the last cover that the doctor had, prior to becoming eligible for ROCS.

If you are not eligible for the ROCS scheme, and you cease work as a doctor, then you must buy a run off cover policy from an insurer like Tego, MDA and MIGA.   A Practitioner Indemnity Run-off Policy is available to practitioners who have held medical indemnity insurance with with the insurer and is available when you:

  1. permanently retire;
  2. cease private practice;
  3. cancel your indemnity policy for another reason; or
  4. do not meet the eligibility criteria for the government ROCS scheme.

A medical practitioner becomes eligible for ROCS if they:

  1. are 65 or over and have retired from private practice;
  2. are under the age of 65 and have not engaged in private practice or medical practice at any time for the preceding 3 years;
  3. have ceased practising due to permanent disability;
  4. are deceased (their estate is eligible for ROCS);
  5. leave Australia after working under visa class 422 or 457 and have left Australia permanently; or
  6. are on maternity leave.

Contact Experien General Insurance Services to find out more or if you would like to benefit from our help with your malpractice insurance across a range of insurers.