News and Press Articles

UPDATE : An Area Causing Concern.

Employers and Public Liability Insurance

Horror stories of hugely inflated premiums for Employers’ Liability and Public Liability insurance premiums are starting to emerge and challenging the ongoing viability of many businesses. Some recent examples we have seen include :-

• A roofing contractor, with a ‘no claims experience for 20 years, whose annual premium has increased from £22000 to £250000
• The premium for a staff car fleet, increased from £45000 to £150000
• A firm recycling plastics could not get renewal insurance, and had to be liquidated
• A demolition company whose annual premium increased from £14000 to £66000.
• The premium of a nursing home increased from £3800 to £8200
•  A nursery schools premium increased from £3500 to £8500
•  As receivers of a metal fabricating business, we have been unable to get any cover!
   
  The reasons behind these substantial increases are a little unclear. In part they are the reflection of the litigious society that we live in, plans for the NHS to claim back the care costs of industrial accidents from employers and the world wide risk experience of the insurance industry.
   
  For those firms that operated in areas of potential risk – contractors, scaffolders, fabricators, haulage, health care, children’s nurseries, consulting engineers, couriers and so on – and where their profitability is under pressure, the increased premiums are likely to cause severe liquidity, and inevitably, insolvency problems.
   
  A quick fix solution of passing these costs on to the buyer or user of the service will not always be possible. Difficult when the increase emerges halfway through a lengthy fixed price contract – embarrassing half way through a term at a private nursery! Those companies that compete in world markets will inevitably lose markets.
   
  So what can companies do?

• Firstly start making enquiries now rather than later and give their brokers time to find alternative quotations – if they can.
• When quoting for new work, isolate the insurance costs from the prime cost so if there is an increase in the contract period it becomes an ‘overrun’.
•  A small firm may be possible to turn it into a form of ‘co-operative/partnership’ – the employees resign and rejoin the co-operative and take out their own personal liability
•  For the larger contractor – get specific insurance cover for each contract and quote separately in the contract price.

Certainly doing nothing is not a solution. Employers’ Liability insurance is compulsory and there are substantial fines (£2500 per day) if it is not taken out or allowed to lapse.

 

The British Insurance Brokers’ Association are currently making proposals to the Treasury to ease the problem and which include-

• pooling arrangements for specific industry groups
•  a workers compensation system
•  moving to a ‘no fault’ system
•  capping liabilities
•  reforming the Employers’ Liability 1969 Act to get small firms to take more responsibility for health and safety issues and which will bring down premiums in due course.

These proposals will not help the short term problems that many firms are, or will be  facing, in the immediate future. The identification of those clients with potential problems and the search for solutions will add value to your client relationship – if you need any assistance in this process please speak to Jeremy Priestley on 0114 275 5033.

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