'More to come' on employers' liability insurance

It will also review the need to insure for 300,000 of the smallest businesses.

The moves are all part of package of measures and suggestions put forward by the Department for Work and Pensions (DWP), following the second and final part of its review of employers liability insurance, published at the end of last week.

The DWP's "agenda for action" aims to help businesses deal with the cost of employers' liability (EL) cover, which has increased in recent years. Premium rises have led to claims that some businesses are operating without the compulsory insurance.

The insurance industry has blamed a huge rise in the number of personal injury claims and associated legal costs, as well as increased claims for industrial diseases such as asbestosis, for the rise in premiums.

Publishing the report, Minister for Work Des Browne, said: "The Government is acting. We are not walking away from the problem. We're committed to further work aimed at encouraging better health and safety in order to reduce costs to firms from injury, illness and absence, improve rehabilitation and reduce process costs.

"There are no quick and easy solutions and this isn't something the Government can just take away and fix. We must continue to work together and build on the successful and fruitful partnership we've developed. This may be a final report but it certainly isn't an end to our work."

Resolving claims

The DWP's first report, in June, looked at "short-term" measures, including working with the insurance industry to bring "fairer risk related premiums" and to reward companies with a strong health and safety record, particularly small and medium-sized businesses.

Since then the Association of British Insurers (ABI) has launched a scheme entitled "Making the Market Work", under which it will work with trade associations on their health and safety schemes and provide insurers with more information.

The first DWP report also requested minimum notice periods for policy renewals so that businesses could shop around for employers' liability cover. Action has been taken by the insurance industry.

The second report develops ideas from the first and focuses on long-term issues, in particular the cost of resolving claims, rehabilitation and so-called 'long-tail' disease risks - long-term occupational diseases.

On the cost of resolving claims the DWP said it intends to build on the findings of recent research and a workshop, which offered practical suggestions on reducing delay and duplication throughout the process. It proposed pilot schemes to test new approaches with the aims of developing Codes of Practice between insurers and clients or between insurers and lawyers.

The Government itself has come in for criticism recently for its plans to recover NHS charges in connection with personal injury claims, something which would add to the cost of many employers liability claims. The DWP said this would now be postponed by one year to November 2004.

Other measures

On long-tail disease claims the DWP said it was liaising with the ABI on considering the case for separation of long-tail disease risk. More specifically, the ABI is currently reviewing the impact of long-tail diseases on the EL insurance cycle to reproduce past results excluding disease claims, to illustrate the impact such a move would have.

There appears to be a consensus of opinion that rehabilitation - getting those who are sick, injured or disabled, back to work - is of benefit to industry, workers, insurers and the economy.

The report highlighted ongoing work by the insurance industry, unions and the Government in addressing this issue. The DWP added that it would consider incentives or obligations that would support the take-up of rehabilitation and the role for Government and others in developing the market for rehabilitation services.

Also, the report revealed that the Government is planning to review the Employers' Liability Compulsory Insurance regulations relating to 300,000 of the smallest limited companies where the owner is the sole employee. The report suggests the DWP will consider an exemption from March 2004.

Reaction to the report

John Parker, head of general insurance at the ABI, said he agreed with the Government that there was a full agenda to tackle.

He commented: "The insurance industry has responded well and quickly over the last year to the concerns that were put to us by ministers and our customers. The ABI initiative assessing trade association health and safety schemes, and the agreement on minimum renewal notice periods, demonstrate our commitment to helping businesses. We are delighted that the Government has responded to our call for a national action plan to improve rehabilitation.

"However, while the market is working, it remains fragile. We continue to believe that separation of the funding of claims for long-term occupational disease is the best way to make the employers' liability market sustainable and attract new capital."

Industry group the CBI welcomed the latest moves but expressed concerns about who would pay for improvements in rehabilitation.

John Cridland, CBI deputy director-general, said: "The Government is right to tackle insurance cost volatility by rethinking rehabilitation. Swift recoveries are good for both employer and employees, but many questions remain unanswered.

"Ministers must make clear who will fund improvements to the rehabilitation framework and how these changes will relate to smaller firms that face greater difficulties getting staff back to work."

He added that increases in premiums had already eased but more work was needed to further stabilise costs and tackle the limited availability of the cover in certain sectors.

Co-operative approach

A spokesman for Norwich Union Insurance welcomed the second DWP report, describing it as impressive.

He said: "In the early stages it appeared that insurers were the root of the problem. What the report highlights now is a recognition that everyone has a part to play. Government, the insurance industry, trade organisations and others don't just see this as a problem, but as the means to finding a solution. It is excellent to see a co-operative approach.

"However, whilst we can understand Government's desire for economic proof, we will still argue the case for separation of long-tail disease risk. Nevertheless Government's role in the review has been undeniably one of co-operation and facilitation and we look forward to continuing the hard work.

"To echo Mr Browne, this is just the beginning of our work."

The full report can be downloaded from the Department for Work and Pensions website - see link above/right.

Johnny Thomson