PI Insurance and You! Evidence Base or Money Laundering?

[PhysioP]

Hi all,

I have often thought in the past as to why it is becoming mandatory to have extreme levels of professional indemnity insurance. Where are people getting the information to foresee what level of cover is deemed a "minimum requirement"? I have tried to find some studies which look at the last 15 years of claims against physical therapists to attempt to further understand this issue. (see attached).


The CNA/HPSO group 2001-2010 Physical Therapy Liability survey (which disregards any settlement under $10,000, being 3337 of the 3889 claims) shows us the average claim to be $79,471. If we include the claims under 10,000 this works out to be approximately $18327 (assuming those claims were ALL $9999, realistically they would have been less). The HIGHEST single claim I could find anywhere on the internet which was successfully settled comes from this study - a paralysis which ended up at 1 Million falling under a "total permanent disability" category.
This article is heavily biased and skews wording / information to highlight the severe end of the spectrum as noted by the regular outlining of the worst recorded cases between informative sections. No wonder as it has been undertaken and backed by an insurance body (and that they have it as a banner on top of their money laundering website, sorry I mean insurance website). So I am quite confident the numbers are probably even lower (potentially didn't include cases which lower the average etc. for undetermined reasons).


The second article is again by the CNA/HPSO group and outlines similar figures, it does show an approximate 9% upward trend of insurance claims from 1995-2004 which is useful for determining the current appropriate cover required.


So how much are you covered for? $10,000,000? $20,00,000? Do you insure your car for 100 times it's value and pay exuberant premiums? I understand that we should be covered for the highest LIKELY claim in the unlikely event of a lawsuit, however are 5 cases in the last 15 years from near 10,000 lawsuits which actually received a 6 digit figure (let alone 1 case receiving a 7 figure pay out) justify our huge indemnity cover? And why is 20,000,000 more expensive than 10,000,000, when in the history of professional indemnity insurance for physiotherapists there has never been a recorded claim in which this was a factor?


I am not saying that we shouldn't be insured! I am just curious as to why organisations are requesting their clinicians have 10 or 20 million as a minimum requirement. Our own regulatory body has no identified minimum for registration, only that a clinician HAS indemnity cover.


Please feel free to do your own research. I couldn't find reliable information for Australian statistics or anything for the last 2-3 years. Also I specifically was after physical therapy claims, not medical claims (of which I am sure there is a much larger top out on claim settlements).


Let me know what you think!

- - - Updated - - -

Meant Highest POTENTIAL claim, not highest likely.

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[physiobob]

I have to agree with you and I have to applaud Physiosure.com for continuing to offer a range of PI cover levels from $1m - $20m. They even have a student cover (6 months policy) from $110. I spend a lot of time understanding indemnity risk while all the time having to manage expectations/regulations of insurers, associations, registration boards, DVA etc. Initially in the early 2000s it was the DVA $10m cover that push up premiums in Australia. No one was allowed to see DVA clients without it. Of course it had nothing to do with risk or claims history. Premiums tend to move depending on the movement of the funds pool under management.

Then the APA began to talk about $5m cover and more. And only just last week, despite their research showing over 90% of Physios in Australia have $5m cover, they now suggest that all members of their association should have $20m cover. Again not related to claims history and risk but perhaps more about getting all their members into one group policy that they can get at a cheap price as the underwriters know the claims will never be as big as what they are saying they are covered for.

Regulation in the law now requires all physiotherapists in Australia to have PI insurance. That in of itself is a questionable decision by the law makers. Really is provides an opportunity for more claims at everyone expense. Most legal people agree that there is no case to be fought if the defendant has no insurance. Lawyers just won't take on the case as there is nothing financial to gain. I would recommend all physio's look to companies like Physiosure and take out a level of cover that fits their risk. We are not all the same in risk profile and so out needs are different. Let's send a message to the APA that they are not in a position nor should they 'suggest' a level of cover that we should all have because of the perceived future needs of the legal profession.

[PhysioP]

Thanks for the reply PhysioBob,

I personally am all for the APA coming up with a recommendation for what we should cover ourselves for. I am just against it being driven from anything other than a practical, evidence based approach utilizing data from previous claims history to model an appropriate level of cover, which currently obviously it is not.

[physiobob]

Unfortunately it is against the law for the APA to give a recommendation. It is even against the law for a broker to give a recommendation. The general comment from a broker is to 'insure yourself for as much as you can afford'. That doesn't really help either.

What I can say in the 10 years I have been involved in the physio insurance market in Australia is that the average claim might be lower than $15K and the most we have seen over that time is a little over $100K. So to suggest $20m as something for all is rather irresponsible (In my opinion of course). Everyone is different and everyone works with different levels of risk, both from what they do and who they do it to.

As already mentioned, and as you can see from the above, premiums are based on the success of funds under management and not claims. That might even be a little wrong too! A bit like bankers do well premiums are stable, bankers do poorly and premiums go up. Such is the insurance market. Physiosure has just managed to provide a price reduction which is great for all Aussie physios :-)