Insurance: protect and save

Insurance: protect and save

When it comes to liability insurance, taking a tough approach to health and safety issues can have a significant effect on premiums

Given that 20­25% of workplace accidents are attributed to alcohol, it seems
wise that, according to a survey by Royal & SunAlliance, 20% of employers
plan to keep their staff out of the pub during the World Cup by showing games in
the workplace.

This might be a rather unusual form of health and safety policy, but
employers that do keep their accident record down, and hence their insurance
claims record, should enjoy lower employers’ liability insurance premiums.

By law, all employers must insure against their legal liability for injury,
disease or death to employees sustained by them and arising from their
employment. Employers are required to insure for at least £5m, though most
policies in practice offer £10m minimum cover. Most major insurers, such as
Norwich Union, AXA, Royal & SunAlliance and so forth, will offer insurance.

However, the riskier the business, the fewer the willing insurers. ‘For
example, if it’s a demolition business or a scaffolding business, Norwich Union
wouldn’t want to insure them,’ says Phil Grace, casualty risk manager at Norwich
Union. ‘As the inherent riskiness of the business increases, you will find fewer
and fewer people wanting to insure them. If a company is in asbestos removal,
then it could only find insurance on the Lloyd’s market. The reality is, the
more risky the activities, the more questions we ask.’

That said, insurers are having to compete for EL business at the moment. ‘We
are in a soft market, where rates are very competitive,’ says Douglas Dale, risk
control manager ­ liability, at insurance group AXA. ‘Every insurer is under
pressure to reduce premiums to maintain their market share. When the market
starts to go harder and rates start to go up, differentiators are looked at more
closely. Somebody who has a poor approach to risk might have to pay a lot more
than someone with a better attitude to managing risk.’

At the moment, however, companies may have the opportunity to negotiate
premiums down. ‘The bigger the business, the more chance there is for
negotiation,’ notes Norwich Union’s Grace.

Given that office-based businesses are seen as relatively low risk in terms
of EL, assessment of risk management procedures will typically be conducted
through correspondence. This might include a review of health and safety

However, manufacturers and other non-office-based companies are more likely
to be surveyed by the insurance company’s personnel. ‘Traditionally we employ
surveyors with a variety of backgrounds,’ says Dale.

‘We would go and look at the business premises. We would want to talk to the
insured to get an understanding of their attitude to risk. Management attitude
is one of the most important aspects for us. If someone has a poor attitude to
health and safety, then it’s an indication that it’s not a very well managed
risk. So we might choose not to insure them, or the terms might not be as

It’s important they demonstrate they have an understanding of what their
responsibilities are to employees and third parties such as the public.’ Such
businesses can expect a more competitive quote on their premium, Dale says.

The company’s accident records will be taken into account. ‘We look to see what
sorts of incidents have occurred in the past and whether companies have done any
analysis of their root cause,’ Dale says.

‘For example, if you have had a lot of eye injuries ­ such as foreign bodies
in the eye ­ that suggests there’s something wrong with the process, or that
people might not be wearing eye protection; possibly there’s a management
supervision issue. So we would look to make sure that the business risks are
being properly managed.’

‘A number of insurers will take into account management behaviour in terms of
how the risks that are present are managed,’ confirms Phil Bell, technical
manager ­ liability, at Royal & SunAlliance. ‘For example, if you are going
to have someone responsible for health and safety, which I strongly encourage,
it needs to be someone in a position of influence with the authority to make
things happen.’

Companies must undertake assessments of the risks that exist in the
workplace, and then take steps to address them, Bell stresses. ‘You have to make
sure the findings are recorded, including the actions taken,’ he says. Training
employees properly is another important element of risk mitigation. ‘It’s about
making sure people know what they are supposed to do, and what they are not
supposed to do,’ Bell says, ‘making sure they have the necessary protective
clothing and know when they need to wear it. It’s important to get people to
sign training records, to show that they understand what they have been taught.
Proper records are crucial. In the event of an accident, if you don’t have the
records, it makes the employer’s position much more difficult. If people do
something a bit daft, if you can show that they have been trained not to do it
and have accepted not to do it, there is a degree of responsibility on the
employee to protect their own health and safety, and it’s easier to defend the

Companies that do put effort into establishing high quality health and safety
policies and practices must make the most of them. ‘Make sure you insurance
broker and insurance company know what you are doing,’ says Bell. ‘If your
insurance company asks to come and have a look round, welcome them. They can
sometimes give helpful advice.’

ABI initiative

In 2003 the Association of British Insurers launched an initiative called
Making the Market Work, designed to help businesses with good health and safety
practices gain greater access to the employers’ liability insurance market.

Trade bodies can submit details of their health and safety schemes to the ABI
for assessment against best practice features that insurers expect to see. The
ABI then reports back to the trade body with any suggested improvements. Once
completed, details of the assessment are sent to ABI members writing employers
’liability insurance. ‘If it meets the required criteria, any prospective
insurer knows that here is a trade association that has in place a robust health
and safety management policy,’ says ABI spokesman Malcolm Tarling.

Insurers take this information into account when assessing the risk from
companies from a particular trade association.

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