Why indemnity insurance? Doctors were revered in the olden times in India. But in current times, due to some doctors’ malpractices or because of some doctors and hospitals trying to get more money by recommending unnecessary medical procedures and medicines, people look at the doctors’ community with distrust. There has been a rise in consumer awareness. Courts are more consumer-friendly now and patients have sued hospitals and doctors malpractice or negligence and the courts have been asking doctors and hospitals to pay for their mistakes.
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Read – Financial Planning for Doctors & how it’s different
What is Indemnity Insurance?
The number of legal cases accusing doctors of negligence have gone up by 400% in the Supreme Court. Doctors are therefore professionals who face the risk of a financial liability in the course of practising their profession. The amount they can be sued for can be really exorbitant. Doctors therefore require special insurance so that they can protect themselves financially and legally when they are sued for negligence, malpractice or mistakes. This special insurance is called professional indemnity cover or medical indemnity insurance. Many insurance companies offer insurance plans to doctors to protect them in their practice. Indemnity insurance for Nurses is equally important.
Liability Insurance for other Professional
Indemnity insurance is also available for other professionals – lawyers, architects, planners, small businesses, event liability etc. I am not sure if professional indemnity insurance is available for psychologists or real estate agents or labs that conduct health checkups. In case if you don’t find standard policy suitable for your requirement – you can always approach an insurance company as a group for customising a cover for you.
Professional Indemnity Insurance – Features
The professional indemnity insurance policy typically has the following features
Coverage under Professional Indemnity Policy
Usually the professional indemnity insurance provides cover for the following depending on the features of the policy taken-
- The extent of financial damage for loss caused to victim which is not a result of willful neglect
- Against unintentional errors and omissions by the doctor, insured qualified employees, insured non-qualified staff and insured partners.
- The policy will not cover criminal acts, fraudulence, penalties or punitive damages.
- Cost of defending oneself in the court of law.
- The plan covers 1 year period.
Compensation from Insurance Company
The policy will pay the sum assured that has been set as a limit as the extent of damage cannot be quantified. The expense over and above the sum assured has to be borne by the doctor. Usually, there is no fixed limit on the indemnity. The cover that one will take depends on factors such as risk, probability of occurrence of events that can make one liable. Here the sum insured is referred to as Limit of Indemnity. This limit is fixed per accident and per policy period. It is called Any One Accident (AOA) limit and Any One Year (AOY) limit respectively. The ratio of AOA limit to AOY limit can be chosen. The AOA limit, which is the maximum amount payable for each accident, should be fixed beforehand. In most policies, the Any One Accident (AOA) limit is restricted to 25% of the Any One Year (AOY) limit. The AOA to AOY ratio depends on the insurance company.
Professional Liability Insurance Exclusions
The insurance policy will not cover penalties, loss of goodwill, personal damages, legal responsibility that cannot be covered under the inherent contract between doctor and patient, medical treatment given for weight loss, plastic surgery, genetic damages and conditions associated with AIDS.
Indemnity Insurance Policy Cost
Premium of Professional Indemnity Insurance depends on the sum assured, profile of the insured, revenue, jurisdiction and risk involved. Premium for the professional cover is generally around 0.3%-1% of the total sum insured.
Comparison – New India Assurance & ICICI Lombard Indemnity Insurance Cover
|Insurance Company||New India Assurance||ICICI Lombard|
|Inclusions||Legal Liability that the doctor has to face due to inaccuracy or mistake while offering his/her professional services.||Liability caused by legal case by patient/patient kin due to inaccuracy or mistake which has caused damage in terms of injury, death or disability to the patient.|
|Coverage||The amount insured is determined on the basis of two conditions – per policy tenure and per accident that is Any One Year (AOY) limit and Any One Accident (AOA) limit respectively.
The ratio these two terms can vary from 1:1 to 1:2, 1:3 and 1:4. The Any One Accident (AOA) level is restricted to 25% of the Any One Year (AOY).
|The insurer has to allow two limits of insurance under the policy: Any One – Year (AOY) Any One Accident (AOA) AOA and AOY can be in the ratio of 1:1 or 1:2.|
|Premium||For an insurance cover for a consulting physician who does not perform surgery, the premium for an insurance policy of Rs. 10,00,000 is Rs. 1140 per year for any ratio AOY and AOA||The Premium charged depends on –
1. Risk group of doctor
2. Limits of indemnity selected
3. Ratio of limits. The AOY to AOA ratio can be only 1:1 or 1:2
|Exclusions||The policy will not pay for claims arising out of contractual responsibilities, loss of goodwill, fines ,penalties, defamation etc.||The policy will not cover
– Illegal activities
– Medical procedures related to plastic surgery, HIV/AIDS and weight loss
– Medical treatment given under the influence of drugs
Check – 9 most Common Insurance Questions
Importance professional indemnity insurance policy
The public is more aware of their rights and the duties of doctors and know that they will be heard in the court of law if they are wronged. The judicial system is also more empathic to the consumer. This will definitely improve the accountability of doctors. (Read – Financial Advisor are like Doctors & vice versa) But doctors should not be harassed or punished unnecessarily. Professional indemnity cover takes care of the financial liability claim raised by the consumer. The doctor should take care that the sum assured is not very small. It should be renewed regularly and that one is covered both at the time of the event and when the claim is made and is to be paid. If one plans to change the insurer, then events of the past should be taken into consideration. A run-off cover helps in these cases.
If you have already taken or in the process to take professional indemnity policy – please share your experience. If you have any questions regarding liability, rates, policies – feel free to add in the comment section.
Great and informative article as always. Appreciate that.
please guide us on AOA and AOA in detail with examples if possible.
I personally have taken UNITED INDIA INDEMNITY . Asked those people but answers were bizarre and lacked logic.
Great and very timely article.
I have been a follower of your articles for last 3-4 years and was expecting an article on this matter. The only problem I face is I can’t just understand how much insurance is sufficient enough.
Thanks for the article.
It depends upon patients profile. like if you have high profile patients the you should opt for higher sum insured. and if you are govt. servant practicing in govt. hospital then opt for lesser amount of sum insured.
Such a good information and tips that you shared with us. You made a good site and giving us such the best suggestions they very useful to us. Thanks for sharing the articles they amazing.
Doctors must get classes on finance ,investment and insurance during postgraduate training to understand basics and help them in todays context of litigations. Maybe doctors from our fraternity take up the cudgel and and start as self help groups/sponsered discussions.
I have a doubt. Can it be taken by a Dr as cover against an already registered case in the consumer court.
No Dr Nathan.
what is difference between liability insurance for hospitals and professional indemnity coverage for doctors, i am a little bit confuse between the two, are these different concepts or professional indemnity is a part of liability insurance.
There is no difference between liability insurance for hospitals and professional indemnity coverage for doctors
even professional indemnity Insurance is the part of liability insurance for hospitals.
Is the premium paid by a doctor having any income tax benefit for his /her ” professional indemnity policy for doctor ” ?
Hi Dr. Anisha
Professional Indemnity Insurance is tax deductible. Business insurance, including professional indemnity insurance, counts as an ‘allowable expense’, which means it’s a cost you can deduct when you’re calculating your taxable profit.
When you’re calculating your taxable profits for your tax return you can subtract business expenses from your income.
Is it come under any Tax planning like 80C or 80D ??
One thing I wish to contribute to this topic which I recently came to know..
there are two kinds of professional indemnity insurance in India…
a) one that covers compensation alone
b) one that covers legal expenses and compensation.
Once a case has been filed against a doctor, it takes multiple hearings in different courts to decide if there is any negligence occurred or any compensation payable or not. most of the insurance companies only provide the compensation amount (national insurance, united india etc) but many a times, legal expenses (paying fees to lawyer) are more than the comensation fixed by court. it is therefore advisable to buy a “comphensive professional indemnity plan” which covers both legal expenses,provide lawyer support in all civil and criminal cases and pays for the compensation if necessary. The premiums are no doubt higher than the simpler plans but I feel its worth paying such premium. As far as i know, MEDECO and MEDEF are two such insurance agencies which provide such kind of comprehensive plan.
Whats your view in this subject matter?
Hi,, one of my doctor colleague said that professional indemnity only covers the legal expenses. And if the doctor loses the case in court and the court asks the doctor to pay a certain compensation to the patient/victim then it is not paid by the insurance company. Doctor has to pay that from his/her own pocket. Is it true?
Hi I am Dr. Muralidharan Vetrivel, a Neurosurgeon from Chennai.
I am taking a fellowship training program, one year in Italy this November. I am looking for an indemnity insurance cover during this period in Italy. I would like to know is there any company which provides it and what’s the process to apply for it.
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