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What's the difference between indemnity and insurance?

17 March 2021

Dr Helen Kaney, Dentolegal Consultant and Medico and Dentolegal Services Team Lead at Dental Protection, looks at the key differences between indemnity and insurance

The relative merits of discretionary indemnity and insurance might not be an issue that dentists spend a lot of time thinking about, and particularly so at a time when there are greater challenges facing us personally and professionally due to COVID-19.

However, with professional overheads increasing and patient income falling, some dental professionals have been looking at alternative or cheaper indemnity products to save money. In most cases, cost comparisons are misleading because no two products are the same. If the cost of your indemnity is your only consideration then there is no need to read on but if you want to understand why the products differ in cost and the benefits they deliver then the following information may make the difference between a lifetime of professional protection and a lifetime of regret.

Types of organisation that provide indemnity

Traditionally, the majority of dentists in Malaysia have been indemnified by a mutual indemnity organisation.

Dental Protection, as part of MPS, has remained a steady and trusted partner for dentists in Malaysia for many years, with the assistance and protection provided for members being based upon mutual discretionary indemnity.

Members of Dental Protection are part of a mutual organisation that they collectively own. Members pay subscriptions that go into a central pool. If they face a complaint, claim, regulatory investigation or any other matter, members have a right to request assistance paid from this central pool.

As the organisation is owned by members, the default position is to see how the member seeking assistance can be helped.

Once a request for assistance is approved, an experienced team of dentolegal consultants, case managers and panel lawyers will then help by offering the right level of assistance without being restricted by small print, financial caps or exclusion clauses. The level of assistance provided will be context driven, but we have the discretion to assist our members in matters where the provision and funding of remedial care can often be sufficient to conclude a complaint or potential claim. Often it is using the flexibility of discretionary indemnity proactively to assist members of Dental Protection that becomes one of the key differentiators between the protection we provide and alternative contract-based insurance products. We know that most patients would prefer to avoid litigation but if there is no flexibility in your contract of insurance, you might either have to use your own money or sit on your hands until the matter proceeds into formal litigation.

This very clearly provides an advantage over the dentist who has a contract of insurance which specifies what protection and services the insurance company will and will not provide, along with details of any exclusions and financial caps. In such a scenario, it is important to have carefully read the policy wording and any policy schedules to ensure that there is full understanding of what is covered and what is not. The devil is in that detail. 

Personal experience

Some of our colleagues at Dental Protection are in the unique position of having worked for both an insurance company and a discretionary indemnity provider.

I am one of those colleagues who worked for The St Paul International Insurance Company Limited (‘The St Paul’)[i] as a dentolegal adviser in the UK from 1999 to 2001. The St Paul saw the clinical indemnity market in the UK as an attractive business, which is how insurance companies as commercial organisations must think, and they provided cover to UK doctors and dentists on a claims-made basis.

The St Paul pulled out of the UK indemnity market in 2001 after only two years. This left their UK dental policyholders to a large extent uninsured and scrambling for indemnity cover. Many decided to become members of Dental Protection. Both discretionary indemnity and insurance can provide dental professionals with the protection they need. What is most important to consider is whether the organisation you have chosen will provide a reliable, high-quality service and whether they have a long-standing history and financial position, which lets you know that they will be here for you long into the future.

Reliability, responsiveness and quality

The first consideration for many is whether protection will be available when you need it.

There appears to be a belief in the minds of some individuals, and this belief is regularly expressed on social media, that Dental Protection can, due to the discretionary nature of the indemnity currently provided, refuse or even withdraw assistance, almost on a whim. That is not correct. Discretionary indemnity organisations must follow the law around how discretion is exercised, to ensure that they are fair and consistent in their dealings.  Medical and dental defence organisations are also governed by their Articles of Association, which form a contract between the defence organisation and the member. If the articles are breached, members have recourse to the courts.

There are very few occasions where we have to decline requests for assistance. These situations arise where either singly or in combination a member was not in membership at the time of the incident or not indemnified for the type of work or procedures that become the subject of a complaint or claim, or the request for assistance related to matters considered outwith the scope of benefits of membership.

By way of contrast, an insurance contract clearly specifies when the insurance company will step in to support and when it will not. It is important to check the fine print of some insurance policies and consider whether there are financial limits, or caps, imposed. For example, damages may be awarded which exceed the policy cap, leaving the colleague personally liable. Some insurers have financial limits on such legal costs as well as imposing significant excesses, which could mean that an individual has to fund some of their own legal costs or risk being unrepresented before the regulator, which is obviously far from ideal. The experience of Dental Protection is that those who have representation before professional regulators obtain better outcomes than those who do not.[ii] It is in your best interests to check the extent to which your provider will help with matters such as complaints or disciplinary procedures.

A further consideration is whether your protection will be responsive to your needs.

Discretionary indemnity has always been considered more flexible and responsive — since the scope of assistance offered to the member can be wider than the precise policy wording of contractual insurance. Discretionary indemnity allows Dental Protection to respond to changes in the dentolegal environment and assist members with emerging risks that may not have been foreseen at the time membership was taken out. This is especially important when new challenges arise as has been the case during this pandemic.

Dentists also need to be assured of the quality of the support they will receive.

Dental Protection has a long history of providing an excellent quality of service to members, with experienced dentolegal consultants and lawyers available to advise, guide and support members when they are facing the most stressful situations in their professional lives. Not all indemnity providers provide the same level of service and assistance, and no other organisation has our experience in managing dental claims. As far as we are aware, Dental Protection has the largest team of experienced dentolegal consultants of any indemnity provider and a member can speak with a dentolegal consultant whenever they need to. Our legal and professional expertise can ensure your issues are resolved as quickly as possible, with the least upheaval and impact on your career and professional reputation.

Who takes the risk – you or the indemnity provider?

Finally, dentists need to understand whether their protection is ‘occurrence based’ or ‘claims made’, and what extra steps you might need to take if you opt for the latter.

Both the subscription charged by mutual organisations and the premiums charged by insurance companies are analysed and decided upon by actuaries, based on the risk to the mutual fund or reserves of the organisation concerned.

With occurrence-based indemnity, the responsibility for any future risk lies with the indemnity provider who ensures that the subscriptions collected today are sufficient to ensure that the organisation will be there when needed, to help members in perhaps 10, 15 or 25 years’ time.

With claims-made insurance, the extent to which risk is carried into the future depends on whether the dental professional can secure run-off or ‘tail’ cover when they end their policy or membership, retire or leave the profession. Therefore, claims-made policies do not need this element of future risk priced into their premiums, which is why they may appear more affordable in the short term.

 If an individual is not offered or is unable able to purchase the necessary run-off cover when they wish to leave, that individual with a claims-made policy has no protection in place if a claim later arises and the incident that gave rise to the claim was not reported in accordance with the terms of the policy. The individual would only be covered if he or she was insured when the claim arose and was reported in accordance with the policy terms at the time and they have separately purchased another insurance policy with a retroactive date dating back to when the clinical treatment which is the subject of the claim was done. This can be complicated and an individual really needs to fully understand the type and nature of the indemnity that they have in place and be confident that it is sufficient for their needs.  

With occurrence-based indemnity, any incident that arises from the time they are with their indemnity provider— even if the claim is raised years later, is indemnified in perpetuity. We are seeing claims against dentists in Malaysia arising seven or more years after the clinical care was provided. The delay represents the time frame attached to more complex restorative treatments failing. A run-off period of any less than these timeframes will not protect a dentist in the event of a clinical negligence claim being made many years in the future. Another important aspect to consider in most, if not all, claims-made policies is the "Incident Reporting" requirement. This provision requires the dentist to report facts or circumstances of an adverse incident that might give rise to a claim in the future, and to do so within a proscribed period of time in order for the claim to be valid under the terms of the policy.

For all of these reasons many dentists prefer the peace of mind and reassurance of the occurrence-based indemnity product that Dental Protection currently provides.

Final considerations

With dentists facing significant financial pressures due to COVID-19, Dental Protection has recently been able to pay the equivalent of two months’ subscription fees back to members, as well as enabling members to adapt their membership to reflect the changing level of work they are doing. This is a clear example of the benefit of being with a mutual organisation that exists to protect your interests and not to make profit.

While some indemnity products others may only provide help with clinical negligence claims and legal assistance before the regulator, we believe that we offer an extensive service – including assistance with dentolegal and ethical advice, patient complaints, disciplinary procedures, inquests, dentolegal support in regulatory matters and media advice.

Ultimately, the decision on whether to choose discretionary indemnity or insurance, occurrence-based or claims-made protection, rests on your individual circumstances. The indemnity provider or insurer that you opt for should be able to explain how they will protect you. Dental Protection would be more than happy to answer any questions you might have that are not addressed in this article.