Anxious doctors insured with Ethiqal, the medical indemnity arm of Constantia Insurance, are in a quandary after a provisional curator on Monday instructed the insurer to give them 30 days to find alternative cover pending his application for the insurer’s liquidation.
Chris Bateman, writing for MedicalBrief, reports that well-placed sources say Ethiqal has ‘a full plan in place,’ to move policy holders into a new insurance structure but were last night torn between an adversarial and appeasement approach to the curator, Deloitte’s Ashish Desai.
Ethiqal was trying to reassure its clients that all claims and contracts would continue to be fully honored, claiming there had been no attrition of paid-up indemnity-policy holders – yet. The last few details of a new insurance structure were being finalised last night, MedicalBrief was told.
An inside source said Monday’s sudden announcement by the court-appointed provisional curator that he is to apply for full liquidation of Constantia Insurance ‘really rocked the boat,” and Ethiqal had immediately begun damage control.
Speaking on behalf of the SA Private Practitioners Forum (SAPPF) earlier, Dr Simon Strachan quoted the Prudential Authority as saying the original court intervention was not triggered by operational or governance failures and that the main restriction was on all new business by Constantia Insurance. Renewal of existing insurance products was still permitted, and all claims were being processed and paid, he asserted.
Strachan said while SAPPF members “must make their own informed decision on their choice of medical insurer,” he and his executive had met with Desai who assured them that “every indication was that Ethiqal would survive and continue to provide medical insurance”.
Strachan added: “The protection of policy holders is both Ethiqal and the curator's primary concern. We believe it prudent to allow some time for the process to unfold and that there’s no need to make rushed decisions about changing insurers. We’ll stay in close contact with the curator and the Ethiqal team, and report again as soon as we have new information.”
Doctors' anxiety
However, in an interview with MedicalBrief, an Ethiqal broker, Jamal Ismail, revealed the full extent of doctors’ anxiety.
“I’ve had about fifteen calls and countless WhatsApp from doctors, especially those in the higher risk disciplines, some of them very disillusioned. This is not like car insurance which takes a few days to sort out. An ongoing medical malpractice claim can take over two weeks to be assessed. If the curator really had the doctors’ interests at heart, he would not have given that 30-days’ notice. What if a claim is only settled in 10 years?” he complained.
Ismail said in the obstetrics space where Ethiqal had reduced premiums from the R1.2m MPS norm to as low at R600 000, there was “not a lot of competition. You have MPS, PPS and Frontier, all of whom are more expensive for the higher risk disciplines”.
The dispute also has obvious implications for patient claimants, something few mentioned.
The Gauteng High Court (Johannesburg) placed Constantia into provisional curatorship on 1 August after it failed to find an investor to inject much needed capital of at least R450m, barring it from taking on new customers. Constantia is a non-life insurance company that falls under Constantia Risk and Insurance Holdings, a subsidiary of JSE-listed Conduit Capital. Conduit's share price fell by 42% to a low of 20 cents when the court ruling was made.
The SA Reserve Bank's Prudential Authority (PA) has been engaging with Constantia since June 2019 after it found that it was not holding sufficient funds to protect policyholders. In terms of South African law, insurers must hold a statutory reserve of money to meet their obligations to pay out claims.
However, in the three years that it provided monthly and later weekly updates to the PA, it was unable to reach the prescribed threshold. According to the Reserve Bank, Constantia needs an injection of at least R450m.
Its unsound financial position was caused in part by the collapse of Insure Group Managers in late 2018, which left a R94m hole in its accounts. The Financial Sector Conduct Authority (FSCA) has been mulling over the criminal prosecution of the directors of the defunct Insure Group, as its liquidator is still trying to recover some of the R1.7bn lost when the insurer went into curatorship. When the Insure Group entered a liquidity crisis, the regulator discovered that instead of passing the premiums on, the group had held onto them for 45 days and invested them in risky and cash-hungry assets without the insurers' knowledge.
While Constantia managed to make some savings since 2019 and remained solvent, it failed to find a strategic partner to "restore the business to financial soundness", the PA noted.
Local insurers at odds with MPS
Meanwhile, local medical malpractice insurers are unhappy that the UK-based MPS is allowed to operate in SA without being a licensed financial services provider
"MPS can continue to be an indemnity provider, but then it must do so in a regulated manner like all the other players in SA," says Jaco van der Sandt, CEO of health professions indemnity at the Professional Provident Society (PPS).
"Greater transparency is required on their SA market offering so consumers know what they are buying."
The PA and FSCA are looking into the nature of MPS’ local operations, something MPS competitors are portraying as an inquiry into its legality and questioning whether it has the right to be providing indemnity protection to local doctors. However, the official statement from regulators is less explicit.
"At this stage, the PA and FSCA’s focus is more on better understanding the operations and business model of MPS," the regulators said.
Sean Riskowitz, CEO of Conduit Capital, (of which Constantia Insurance is a subsidiary), believes MPS should not be providing indemnity cover in SA if it is unlicensed.
He cites the Insurance Act, saying it specifies that no unlicensed entity may enter into an arrangement under which an entity, in return for a premium, undertakes to "meet insurance obligations that fully or partially indemnifies loss on the happening of an unplanned or uncertain event".
Riskowitz “struggles to see,” how MPS’ purported provision of indemnity against malpractice claims in return for a membership ‘fee’ does not meet the criteria of insurance under the Act."
However, Graham Craig, MPS’ business development director for SA, said the organisation does not provide regulated financial services in the country, which is why it is not registered or licensed as such. As a mutual, not-for-profit, member-owned, or so-called friendly society, MPS only allows members to seek assistance for matters arising from their practice in accordance with its memorandum and articles of association.
“MPS has taken a large number of calls in recent days from doctors impacted by EthiQal’s situation. We sympathise with these doctors and understand the concern and uncertainty they may be experiencing around their professional protection. We are currently looking at ways in which we can best support doctors impacted by the situation with EthiQal, including the option of offering membership. All doctors can apply and will be assessed on a case-by-case basis.
“MPS has been supporting members in South Africa for 65 years and currently supports more than 30 000 members in South Africa. During that time MPS has collected the level of subscriptions needed to ensure members are protected long into the future, while new providers of professional protection have come and gone.
“However, all providers exist to support healthcare professionals and it is in nobody’s interests to see providers placed in liquidation and for doctors to feel unsettled.
“As recent developments show, it is more important than ever that healthcare professionals consider more than simply price when it comes to their professional protection. They need to be reassured that they are with an organisation they can trust has the experience and expertise to support and protect them in the long-term," Craig said in a press statement.
Craig added that MPS' unique model sometimes leads to misunderstandings, which have been repeated recent days.
“MPS members pay subscriptions and if they face a complaint, claim, regulatory investigation or any other matter, members have a right to request assistance from the fund(s) raised by these subscriptions.
“We clearly inform members when they join that they are not purchasing an insurance policy but are instead subscribing for membership with MPS, which comes with accompanying benefits, one of which is access to discretionary indemnity."
Van der Sandt acknowledges that the MPS is the largest provider of professional indemnity protection to medical professionals in SA but says the criticism of the organisation is about the lack of fairness. He says local medical malpractice insurers are operating on uneven terrain.
"The fact that MPS is providing an insurance-like offering without being regulated as a financial services provider is the challenge. This provides no safety net to SA medical professionals. Think about treating customers fairly (regulation) and policyholder protection rules, or the right to approach any of the financial services sector ombuds," he challenged.
Contacted by MedicalBrief, Desai described Ethiqal’s claim that they were prevented from public commenting by his curatorship as "nonsense.”
He asked MedicalBrief to send a list of e-mailed questions to Alex Brownlee, Ethiqal chief executive, promising to collaborate with him in providing answers.
Brownlee said he was bound by the court order to work through Desai, and promised to revert after talking to him. Neither had responded at the time of going to press.