Broadly speaking, there are two types of medmal indemnity or insurance and we would encourage all cosmetic/aesthetic practitioners or clinics to speak with an experienced (and specialist) medmal insurance broker.

Discretionary indemnity is where legal and financial assistance is provided at the discretion of the provider, a Medical Defence Organisation (MDO) which operate effectively as a members mutual. Most doctors or dentists are members of one of the four big MDOs. These MDOs offer an occurrence-based indemnity that is seldom offered by commercial insurers; this provides cover for incidents which occur during the policy or membership period, regardless of when the claim for that negligence is made, hence there is no need for run-off cover.

There are several advantages including the long experience of the providers, their size and sometimes competitive premiums as a result of scale. It is said that the fact that the cover is discretionary (i.e., not circumscribed by defined risks in a legally binding policy) allows MDOs to cover new or unanticipated risks that would not have been included in a commercial insurance contract. Discretionary cover is not backed by an insurance contract between the healthcare professional and the provider; they are also not regulated by the FCA or insurance ombudsman. Hence, the concern is that an MDO might exercise its discretion not to indemnify a member for a claim even though the claim has been properly reported and the member has done nothing wrong. There are anecdotal (and disputed) reports of some MDOs exercising their discretion not to indemnify members more frequently than the others. In the wake of the Ian Paterson scandal, the government commissioned a consultation including the question of whether discretionary indemnity is still fit for purpose, but this consultation has not concluded.

Contractual or commercial insurance is a policy with a contractual obligation to compensate for some defined loss or damage, by making a money payment, and supporting policy holders with legal advice and representation within the scope of the policy terms. The market is still relatively small, but there are some big, well-known players you will recognise from other forms of insurance. The biggest draw is arguably that the policy is legally enforceable; it is not at the discretion of a claims committee. It is also regulated by the FCA and insurance ombudsman. Most commercial insurers only offer claims-based indemnity or ‘claims made’. This only provides cover for incidents which occur during the policy or membership period provided that the claim is made and reported prior to the end of this period. Once the policy or membership has lapsed, no cover will be provided in respect of new claims not reported during the policy or membership period. Run-off cover will be required to remain protected against any further claims that were accrued but not reported during their policy or membership period. In some cases, this cover may have to continue after you cease practicing or retire given claims can surface several years later.

Do not assume that all policies are the same; in fact, there is a significant difference in terms & conditions between providers which must be studied carefully, including premiums, caps on cover, deductibles, exclusions and notification requirements. For example, exclusions for celebrity or professional sports patients are not uncommon. We saw one policy recommended to a diagnostics centre where the policy contained an express exclusion for any claims resulting from diagnostic services, although the premium was very competitive! A good broker will get to know your business and help to find a policy that fits best. Hence, policies can be flexible and bespoke, with advantages for some policy holders, for instance those not offering high risk services. You must be sure that the policy is a good fit for you as a cosmetic practitioner and that the information provided to the insurer is accurate. Getting this wrong can be disastrous and being refused cover (or ejected) by one insurer can make it very difficult to get cover elsewhere. Given your premium is, in many ways, a deferred purchase of legal services, some insurers are not very transparent about their legal panels or how they appoint firms (i.e. it may not always on the basis of who will give you the best representation). You may have your own trusted advisers but there is often resistance to allowing their use off-panel. There may also be coverage issues when changing from one provider to another as sometimes happens (or indeed from a MDO to a commercial insurer or vice versa).

If you are a cosmetic/aesthetic practitioner, we would be happy to give you a pointer and can also introduce you to some excellent trusted medmal brokers.

If you have any questions on the above, please contact Matthew Trinder or Andrea James for more information.