Role of the insurance industry
54. We were initially drawn to the principle of using
the insurance industry to penalise bad performance and reward
good performance in companies' health and safety practices. A
number of witnesses argued that this could be achieved by making
the link between risk and insurance premiums more explicit. The
principle behind this is that those companies implementing high
standards present a lower risk, and should accordingly be charged
lower premiums for their employers' liability insurance (and vice
versa).[85]
We looked at these proposals and at some of the research that
has been done by other bodies.[86]
However, the evidence on the extent to which insurance products
can be used to improve health and safety practices is ambiguous.
55. A number of witnesses argued strongly for greater
use of the insurance industry. RoSPA advocated methods by which
the cost of the regulatory system might be passed on to those
who create risk, including the adjustment of insurance premiums.[87]
The TUC also supported intervention in the insurance market as
a means of introducing stronger incentives for better safety standards.[88]
56. At first sight, these arguments seem persuasive.
However we received evidence from the Association of British Insurers
pointing to a number of practical difficulties in implementing
this principle.
57. The over-riding difficulty concerns the competitive
nature of the insurance market in the UK which mitigates against
the introduction of financial incentives. In short, if a company
finds its insurance premiums rise as a result of poor health and
safety performance it can simply approach a different insurance
company which is often willing to undercut the original quote.
This was the conclusion reached by a number of studies.[89]
The Association of British Insurers made the same point, commenting
that "there is always an incentive for companies who wish
to gain market strength to attract businesses by countenancing
lower standards, and charging lower premiums".[90]
58. Second there are a number of other factors upon
which insurance premiums are based which distort the creation
of a more direct link between premiums and health and safety practices.
Premiums are determined according to size of business; historic
insurance claims record; and sector. Changes in these factors
often have a greater impact on premiums than any health and safety
issues. This, then, brings into question the ability of the insurance
industry to effect change in this way.
59. Third, the Association of British Insurers argued
that insurance premiums are too insignificant a proportion of
running costs for the vast majority of companies and that "it
is therefore possible that it would cost more [for the company]
to change business practice than that change would be worth in
premium reductions".[91]
60. In summary, the evidence from the insurance industry,
and indeed from other studies, is that this is not an effective
tool in the UK, in the context of the existing legislation. We
therefore conclude that in practice it is very difficult to create
an explicit link between insurance premiums and health and safety
practices and that, as a result, the ability of the insurance
industry to effect change is limited, except perhaps for high
risk, highly capitalised firms where the cost of an accident may
be high and may indeed influence premiums.
61. Nevertheless, insurance companies can do something
to help. We were told that insurance companies offer safety and
risk consultation services and survey premises in order to reduce
risks and minimise the incidence of accidents and diseases.[92]
This is an important service, particularly given the increasing
need for the HSE to find ways of working with and through intermediary
organisations (see paragraph 82). It is therefore important
for the HSE to ensure that the advice being disseminated by insurance
companies is fully compatible with the advice offered by the HSE
and that the priorities they stress are those considered important
by the HSE.
62. Moreover, pressure should continue to be applied
to urge the insurance industry to do more to reward companies
with high standards in health and safety. We are particularly
concerned that at present, companies with such high standards
appear to be subsidising those with poorer practices. We therefore
recommend that the HSE and the Government take all possible steps
to actively encourage insurers to adjust premiums and insurance
conditions[93]
to reflect good practice in health and safety.
Workplace safety representatives
63. One of the duties required of employers under
the Health and Safety at Work Act 1974 is to consult with employees
over health and safety matters. Within unionised workplaces this
takes place through statutory safety representatives. This system
has generally been found to work well, and a number of witnesses,
primarily on the trade union side,[94]
argued that there should be an expansion of the powers currently
afforded to safety representatives.
64. Two main additional powers were suggested: an
ability to change or stop dangerous work practices;[95]
and a power to initiate prosecutions.[96]
The London Hazards Centre[97]
argued that such changes would result in a radical improvement
in health and safety management and reduce the likelihood of serious
accidents and injury. The key advantages appear to be that first,
action can be taken on the spot and may therefore be more effective
in preventing a potential accident than inspections by HSE which
rely more on chance to 'catch' firms operating dangerously; and
second, employees are often in the best position to understand
the risks attached to their work processes. A further argument
in favour of these proposals is that given HSE can only inspect
a small minority of workplaces, concentrating on high-risk workplaces,
extending the role of workplace safety representatives could help
extend the HSE's 'reach'. Witnesses pointed to experience in other
countries where, it is claimed, safety representatives with enhanced
powers have been effective in improving health and safety in small
and medium sized firms.[98]
65. The CBI was interested in facilitating the reporting
of unsafe practices by workplace representatives or others, but
it did not agree that they should be given increased powers. This,
Mr Alesbury believed, "might promote antagonism between various
parts of the company".[99]
RoSPA was similarly unenthusiastic about the concept of enhanced
powers for safety representatives, arguing that it would allow
employers to avoid their responsibilities. It told us this would
"dilute the primary responsibility of line management, there
could well be unscrupulous line managers who would rely ... on
the fact that their safety representatives have got these powers,
not to do anything, in the hope that the safety representatives
would pick the matter up".[100]
Instead of giving one person increased responsibility or power,
these witnesses argued that it was important for all employees
to be encouraged to take appropriate action, if they felt their
health and safety to be at risk.[101]
Key to this, argued the CBI, was the promotion of a "blame
free culture".[102]
66. Whilst we accept that all employees should be
safety-conscious and be able to voice concerns, we believe that
workplace safety representatives have an important role to play
and would welcome in principle the expansion of powers of workplace
safety representatives. However, we are concerned about the practical
difficulties this would involve. Any changes in the law would
only impact on some workplaces—for example it would not
apply where there are no trade unions, or in small firms.
67. A further proposal which was put forward was
the concept of regional or 'roving' safety representatives.[103]
This would involve an existing trade union-appointed safety representative
taking responsibility for inspecting workplaces of other employers
(where members of their trade union work but there is no existing
representative) in his/her region or area. This was suggested
by the TUC and by two unions: the Broadcasting Entertainment Cinematograph
and Theatre Union[104]
and UCATT (the Union of Construction, Allied Trade and Technicians)[105]
who claimed that "regional or roving safety representatives
work effectively in Sweden".[106]
We support this proposal, which we believe may be one way of better
protecting the health and safety of casual workers or those in
smaller companies, which the HSE has the most difficultly in reaching.
As the TUC points out, "it does not seem to be a controversial
issue".[107]
68. The Director General of the HSE told us that
the Commission has published a discussion document[108]
to look specifically at ways to improve employee participation
in health and safety—particularly given the context of labour
market changes and the decline in trade union membership. This
document concludes that the status quo is not desirable, and puts
forward a number of options for change including a strengthening
of the legislation to increase the powers of safety representatives,
and the introduction of roving safety representatives. The HSE
has asked for responses on these and other options by 17 March
2000.
69. We recommend that the HSE initiate pilot schemes
for roving safety representatives across the country.
68 HSE03 Back
69 HSE18,
para11 Back
70 HSE06,
HSE15, HSE23 Back
71 HSE15 Back
72 HSE15 Back
73 HSE25,
para55 Back
74 HSE21 Back
75 The
original fine of £48,000 was reduced after an appeal by the
company to the Appeal Court Back
76 HSE25,
para55 Back
77 ie
where the defendant pleads not guilty Back
78 PQ94821-also
see PQs 90242 and 78238 Back
79 Q377 Back
80 The
Law Commission (Law Com No 237) Legislating the Criminal Code
Involuntary Manslaughter. Item 11 of the sixth programme of law
reform: criminal law 4 March 1996 HC 171 Back
81 HSE20a Back
82 The
HSE announced on 22 November 1999 "an active policy of naming
companies and individuals convicted in the previous 12 months".
The measures announced include publication of an annual report
naming companies and individuals convicted in the previous 12
months; this information also to be made available via the Internet;
publication of penalties awarded by the courts; and enhanced publicity
of impending prosecutions. (Q355 and HSE Press Release, No: E233:99,
22 November 1999) Back
83 See
evidence submitted to the Environment Sub-committee's inquiry
into the Environment Agency-HC829 (Session 1998-99) Back
84 HSE20,
para21 Back
85 The
Employers' Liability Compulsory Insurance Act 1969 requires employers
to take out a minimum level of insurance cover against compensation
claims from employees suffering ill health or injury at work.
Employers must display a copy of their Certificate of Employers'
Liability Insurance where employees can easily read it. Back
86 Tim
Storrie, 1996, European Liability Insurance Market, FT
Financial Publishing; European Foundation for the Improvement
of Living and Working Conditions, An Innovative Economic Incentive
Model to Improve the Working Environment, Dublin, 1996 Back
87 HSE03-RoSPA
also suggested using other financial incentives such as grants,
soft loans or improved tax allowances Back
88 HSE18,
para21 Back
89 Including
Tim Storrie, 1996, European Liability Insurance Market, FT
Financial Publishing. However, it should be noted that other
studies-for example, the European Foundation for Living and Working
Conditions in their report on economic incentives to improve working
environments-found that they may well be applicable in other insurance
markets, such as France, which is less competitive than the UK. Back
90 HSE28,
para3.9 Back
91 HSE28,
para3.2 Back
92 HSE28,
para 2.2 Back
93 HSE25,
para45 Back
94 Including
the TUC (HSE18, para 12)-also see HSE06, para12, HSE15, HSE23 Back
95 The
issuing of 'provisional' improvement notices was put forward by
the TUC (HSE18, para12, Q160) and the London Hazard Centre (HSE15) Back
96 See
the London Hazard Centre who called for such representatives to
be given powers to "initiate prosecutions against employers,
which would establish the right of appeal over an enforcement
officer's decision not to take action or prosecute". (HSE15).
Back
97 HSE15 Back
98 For
example, Australia-HSE23 Back
99 Q55 Back
100 Q80 Back
101 Q80 Back
102 Q61 Back
103 The
Broadcasting Entertainment Cinematograph and Theatre Union (HSE02)
and UCATT (HSE23) suggested this. Also see HSE06 and Q161 Back
104 HSE02 Back
105 HSE23 Back
106 HSE23 Back
107 Q161 Back
108 HSC
Employee consultation and involvement in health and safety.
Discussion document Back
