Employee insurance costs, particularly employers’ liability insurance, rose by an average of 50% in 2002, according to the Office of Fair Trading. But some companies have seen premiums rise by as much as 700% in 12 months.
Insolvency practitioners say this could be the start of a trend, as a number of companies, particularly in the construction and manufacturing sectors, are worried they may not be able to continue trading as a result of the rising insurance costs.
One of the UK’s last deep coal mines, Betws colliery, warned last week it would close ‘within weeks’ because of rocketing insurance costs.
Nick Hood, senior partner of Begbies Traynor, told Accountancy Age: ‘Insurance costs are going through the roof. It is a worrying problem, particularly for those companies in the construction sector.’
Blair Nimmo of KPMG said: ‘Insurance premiums are generally increasing so [the rise of employers’ liability] is certainly an issue and could quite possibly become a trend.’
‘We just recently dealt with the case of Scottish demolition company Scotdem where ongoing insurance costs were a problem and it went into liquidation.’
Kroll partner Phil Duffy said that high costs meant some companies were not taking out insurance at all.
‘Payments have increased significantly and some advisers are choosing not to continue paying because they can’t afford it,’ he said.
John Alexander, head of corporate recovery at Carter Backer Winter agreed, saying: ‘All insurance premiums are causing concern. In particular, professional indemnity premiums are causing many professional practices to close or to merge to save costs.’
Steve Absolom and Will Wright from KPMG Restructuring have been appointed joint administrators to City Motor Holdings and associated companies
Partners from Johnston Carmichael have been appointed as joint administrators to Axon Well Interventions Products UK
Begbies Traynor have been appointed administrators of William Anelay Ltd, York, one of Britain’s longest-established construction and heritage restoration companies
Smith & Williamson has been appointed administrators of charity 4Children