Forum Brief: Employers' liability insurance

The employment minister has pledged to help employers deal with the costs of having to take out compulsory liability cover.

Employers have been "hit hard" by the government's demand they have compulsory insurance, Nick Brown admitted as he announced a cross-Whitehall review that will include the Treasury, DTI and Lord Chancellor's Department.

A spokesman for the DWP told ePolitix.com: "We will be talking further with industry with a view to producing a second report in the autumn to take forward our long term policy aims."

Forum Response: Norwich Union

Richard Acworth, public affairs manager at Norwich Union, told ePolitix.com: "It is good to see that the government has accepted the complexity of the issue and that together a suitable solution can be reached.

"It is also good to have issues accepted such as the costs of claims , occupational illness and disease and not a quick fix solution attempted.

"However it is important to make clear that the risk of an accident happening such as a slip or a fall in the workplace is markedly different to the uncertainty of future events such as new diseases.

"Risk can be priced and predicted - uncertainty can not."

Forum Response: Association of British Insurers

Mary Francis, director general of the ABI, said: "This report recognises economic reality. Insurers' costs have risen steeply and prices had to follow. The industry is doing all it can to help customers manage the effects, but the costs of the compensation culture - particularly legal costs - must be tackled at source.

"The government needs to consider a new system for funding claims for diseases like asbestosis, which can take a tragically long time to emerge. These claims place too heavy a burden on the UK's system of compulsory insurance for workplace compensation and need to be funded and managed separately.

"There will inevitably be some disappointment that the government hasn't yet come forward with clear-cut solutions. But it is now important for everyone with an interest in this subject to contribute constructively to the debate. The momentum for fundamental reform must be maintained."

Forum Response: British Retail Consortium

Bill Moyes, director general of the BRC said: "It is of tremendous concern to our members that insurance costs generally, but in particular those relating to employers' liability, appear to be rising without any relationship to actuarial risk.

"There appears to be little doubt that recent institutional losses on the stock market are being recouped through rises in insurance charges. Retailers have a clear incentive to minimise risk, because their claims history will impact on premiums.

"This is somewhat overshadowed by the very large percentage increases in premiums at a time when claims are reducing year-on-year in the industry and is particularly frustrating for a low risk sector, such as retailing. For these reasons we are supportive of a government review of ELCI.

"In order to achieve 'a fairer system' and address the current structural imbalance we believe that ELCI premiums should be ring-fenced, with risk covered by an allocated pool of funds.

"We welcome an emphasis on risk related premiums that reward companies with a strong health and safety record, provided the benefit is not undermined by self-assessment packages that are onerous and overbureacratic, particularly for SME retailers.

"We suggest that the Health and Safety Laboratories is best positioned to evaluate the impact of separating long-term occupational risk from risks due to accidents."

Forum Response: Federation of Small Businesses

John Emmins, national chairman of the FSB, said: "We have been working with Nigel Griffiths, minister for small businesses and are pleased that a number of FSB proposals have been taken on board. Insurers and brokers will have to give three weeks notice when cover is up for renewal and look at the health and safety records of individual businesses before denying cover.

"The government has recognised that the growing compensation culture is a real problem and has given a commitment that future costs in compensation cases will be 'reasonable.' There also appears to be a genuine appetite to reform the outdated employers' liability legislation which is a very big step forward."The report refuses to accept that the market has failed. There are small firms out there required by law to have employers' liability Insurance, but unable to find an insurer prepared to offer the cover. Others just about managed to weather last year's increases but will find another round too much."Small firms will have to wait until the autumn for any action. The government raises two billion pounds a year in Insurance Premiums Tax by creaming off five per cent on each and every insurance renewal. This is an obvious revenue stream that could easily be used to provide short term assistance."

Forum Response: General Insurance Standards Council

Catherine Nicoll, head of communications for the GISC, told ePolitix.com: "The GISC would like to respond in particular to the first area of the government's review, setting out its intention to "scrutinise the market to seek raised service standards including minimum notice periods for policy renewals so that businesses can shop around for Employers' Liability cover.

"Such service standards already exist, via GISC, the existing regulator of businesses offering general insurance. Businesses would be well advised to arrange their insurance through GISC members who commit to standards of good practice including the responsibility to 'provide adequate information in a comprehensive and timely way' and to 'notify Commercial Customers of the renewal or expiry of their policy in time to allow them to consider and arrange any continuing cover they may need'.

"For some months GISC has been monitoring the situation regarding insufficient notice where renewal terms are not being offered. Although it is generally not GISC's policy to investigate complaints from commercial customers, we take such allegations very seriously and have been reviewing cases where there could be breaches of our rules.

"Experience so far suggests that insurers generally are giving sufficient notice where renewal terms are not offered, particularly where they have publicly pulled out of the market for employers' liability. GISC would expect its intermediary members to make customers aware of this and that they are seeking alternative cover because the existing insurer will not offer renewal terms."