The Evolution of Medical Indemnity: From Discretionary to Contractual

Every healthcare professional knows the importance of adequate medical indemnity insurance, safeguarding you against the potential threat of patient claims. But it hasn’t always been this way.

In light of various court rulings and an ever-changing legal and public perception of healthcare, medical indemnity has had to evolve continually to create the system we have today.

This article delves deeper into that evolution, highlighting what’s happened through the centuries and why it’s needed to happen. So, let’s start by investigating how the power has shifted through the years between patients, doctors and judges.

Medical indemnity in the UK: a quick timeline

The UK’s approach to medical negligence insurance has evolved through at least six distinct periods, each focused on different notions of negligence and elements of the doctor-patient relationship.1

  • 18th to mid-19th century: Patients had significant control over their diagnosis and legal processes, and people largely viewed medical negligence as a trade contract.

  • Mid to late 19th century: Advances in medical knowledge and professionalisation shifted the power to doctors, although patients still held considerable legal leverage.

  • Early 20th century: Legislation and public health developments brought doctors closer to the state, and legal views started to favour doctors’ opinions over patients’.

  • 1950s onwards: The ‘Bolam’ precedent of 1957 empowered doctors in UK law, giving them significant control over medical negligence standards and reducing patients’ legal rights. During litigation cases, the ‘Bolam test’ effectively gave other doctors the right to determine whether clinical negligence had occurred.2

  • 1980s to 2000s: Privatisation and the rise of patient expectations led to increased levels of litigation despite doctors retaining significant control over diagnosis and self-regulation. Between 1990 and 1991, the British Medical Journal (BMJ) estimated the cost of clinical negligence claims to the NHS at around £52 million.2

  • 21st century: Greater emphasis on patients’ rights and ethical considerations started to appear, with increased pressure on the Bolam precedent due to various court rulings. One famous example of this was the ‘Bolitho case’, which allowed judges to overrule medical opinions if they deemed them illogical or unreasonable.2

These six periods saw much back-and-forth between who should hold more legal authority in medical malpractice cases: doctors, patients or judges.

This dialogue continues to this day; recently, the Department of Health and Social Care (DHSC) outlined a need for patients to access fair compensation.3

So why is this the current view? To understand this, we must look at our more recent history and focus on one particular moment: the Paterson Inquiry.4

The Paterson Inquiry

In 2017, Mr Ian Paterson – a Consultant Breast Surgeon working privately and for the NHS – received a criminal conviction for wounding with intent and unlawful wounding. He was also found to have misrepresented test results, exaggerated cancer risk and carried out unnecessary procedures on patients.5

However, as a Medical Defence Organisation (MDO) member, he was protected by a discretionary medical negligence policy. So, when the patient claims first arose, it was at his MDO’s discretion to decide whether it would contribute financially towards the case.5

The MDO decided not to cover the claim, which meant that without the private hospitals’ compensation, the patients exposed to Mr Paterson’s negligence would have remained uncompensated.5

The results of Paterson’s conviction later led to an inquiry by the DHSC, questioning the adequacy and accountability of the current medical indemnity system.4

Clinical governance updates: a quick timeline

Following the Paterson verdict, many changes and updates in clinical governance occurred, with various bodies seeking a fairer system that protects healthcare professionals and patients.

Here’s a quick overview of what’s changed:

  • 2018 While the Paterson Inquiry was ongoing, the DHSC released a consultation paper addressing potential reforms and improvements to the current medical indemnity insurance offered to healthcare professionals.3

  • 2019 The Independent Healthcare Provider Network, with the former NHS England National Medical Director Sir Bruce Keogh, launched the Medical Protection Assessment Framework (MPAF) to provide a standardised framework that assesses medical indemnity insurance needs and requirements.6 The DHSC also released the results of its consultation paper, in which several health professionals described discretionary cover as ‘not fit for purpose’.3

  • 2020 COVID-19 prompted new considerations by the General Medical Council (GMC), NHS and DHSC about how to address the unique challenges that doctors had to face during the coronavirus crisis.

  • 2021 The Paterson Inquiry raised concerns regarding the broader indemnity market, especially around patients’ inability to access fair compensation.3,4

  • 2022 The Paterson Inquiry concluded and highlighted systemic failures in the oversight of medical practitioners, underscoring robust medical indemnity insurance’s importance.4 The UK Government established the Elective Recovery Taskforce to explore ways to maximise the private sector’s contribution and capacity in addressing NHS waiting lists.7 A refreshed MPAF looked to improve further the safety and quality of care delivered by private healthcare providers, highlighting the need for valid and appropriate cover.8 The DHSC launched a survey to evaluate the financial implications of indemnity, assess the need for patient protection and explore alternative approaches.

  • 2024 The GMC published updates to its Good Medical Practice for 2024 guidelines, emphasising the need for doctors to review their medical indemnity cover regularly.9

Medical indemnity: the current landscape

Following these changes, the current medical indemnity landscape looks a lot different to how it did before, and one reason for that is because of society growing ever more litigious.

With various junior doctor strikes over recent years and NHS waiting lists at an all-time high, patients are more likely to make claims than before.10 In fact, figures by NHS England and the NHS Resolution show that patient claims and clinical negligence payouts have steadily increased year-on-year.11,12

Because of this movement – while there may still be several questions and factors to iron out – one thing has become abundantly clear: discretionary indemnity is set to become a thing of the past.

The limitations of discretionary indemnity

You only need to look at the results of the Paterson Inquiry to understand why many see discretionary indemnity as ‘no longer fit for purpose’.3

This insurance has been around since the early 20th century and is provided by MDO organisations like the Medical Defence Union (MDU) and the Medical Protection Society (MPS).

As its name suggests, this coverage leaves it up to the provider’s discretion whether to offer support in the event of a claim. It provides no contractual guarantee that you or your patients will be protected should you face a claim.

Discretionary indemnity also has several other limitations. For example, it offers:

  • No regulation: Neither the Financial Conduct Authority (FCA) nor Prudential Regulation Authority (PRA) regulates MDOs, so you won’t know if they have the financial means to help or whether the sale was conducted in line with ‘Treating Customers Fairly’ obligations which apply to the sale of insurance otherwise for FCA regulated entities.

  • Potential for discretionary refusal: As with Paterson, your provider may decline to cover specific claims, with no obligation to follow a contract leaving you unprotected and vulnerable to substantial costs, including required legal expenses.

  • Uncertainty and lack of transparency: The decision-making process can be long-winded and confusing, leading to anxiety over whether you’ll be protected or not.

The shift towards contractual indemnity

On the flip side, the recent clinical governance updates have driven a movement towards contractual indemnity.

Otherwise known as contract-based or contract of insurance cover, this insurance is built around each healthcare professional’s role, responsibilities and career stage, offering tailored protection based on a clearly worded contractual agreement.

This means it will give you the following:

  • Legally binding coverage with specific terms and conditions
  • Guaranteed support from an FCA and PRA-regulated provider
  • Complete peace of mind over what the insurance covers

In other words, if a claim falls within the scope of your policy, you’ll have guaranteed protection to cover your assets, professional reputation and, most importantly, your patients.

Unlike discretionary indemnity, contractual indemnity helps you not only meet GMC-set standards but also abide by the Health Care and Associated Professionals Order 2014, which states that all regulated healthcare professionals must have ‘adequate’ professional indemnity arrangements.13

Enter the new era with THEMIS

At THEMIS, we keep up to date with the latest developments in medical indemnity and are committed to extending our expertise to you.

Through our teams wealth of guidance and expertise in clinical risk management and healthcare litigation, we can provide the peace of mind you need by offering tailored protection you can rely on.

To learn more about how to switch your existing policy to us or to review your existing policy, please get in touch – our friendly team are more than happy to help.

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