Select Committee on Work and Pensions Written Evidence

Additional memorandum submitted by ABI

  The ABI (Association of British Insurers) represents the collective interests of the UK's insurance industry. The Association speaks out on issues of common interest; helps to inform and participate in debates on public policy issues; and also acts as an advocate for high standards of customer service in the insurance industry.

  The Association has around 400 companies in membership. Between them, they provide 94% of domestic insurance services sold in the UK. ABI member companies account for almost 20% of investments in the London stock market.

  This paper sets out the ABI response to the BRE consultation on improving outcomes from health and safety. Insurance plays a vital role in incentivising good health and safety practice in the workplace, and insurers are leading the way in promoting occupational health and ensuring effective rehabilitation.

1.   Do you believe the British health and safety system achieves the right balance between protecting workers, and the demands it places on employers and others?

  Given the UK's positive record on health and safety, we are clearly getting something right. However, we should always be ready to accept improvements and streamlining to the system.

  One of the key areas is in getting sick and injured people back to work, on which we have a relatively poor record. It seems illogical to be successful at preventative work, but to leave those who do become absent to languish without adequate support or rehabilitation. Not only is this bad for employers, it is disastrous for employees and their families, and also has repercussions for the state, in the form of lost tax receipts and increased benefit payments. The UK system needs to have more occupational health services and vocational rehabilitation built in.

  More on ways to improve the UK's record on better return to work rates is contained in question 7.

2. Are legal duties applying to the charitable and voluntary sectors sufficiently clear to support charitable and voluntary activities whilst protecting the people affected by them?

  Insurers play a major role in helping organisations in the charitable and voluntary sectors manage risk and access insurance products.

  For example, in 2005, in conjunction with the Home Office Insurance Cover Working Group, the ABI ran a campaign raising awareness of the importance of risk management, with wide distribution of its pamphlet `Living with Risk' (see attached copy), and open events for charity organisations to meet insurers.

  Individual insurers also undertake numerous activities to support organisations in this sector in managing their health and safety systems—further information is available on request. Insurers tailor their products for charities' needs, accommodating both their core activities and their fundraising activities with a range of specific products, as well as extending standard products to cover liabilities particular to the sector.

  Insurance products specifically for the charity sector include:

    —  Hirers Liability: liability cover for non-profit users of the premises

    —  Trustee Indemnity: cover for wrongdoing or breaches of trust by board members

  Insurance products adapted for the sector include:

    —  Employers' Liability: cover for an employee making a personal injury claim extended to volunteers

    —  Employee Dishonesty/Fidelity Guarantee: cover for the theft of the organisation's money or property by staff extended to volunteers

    —  Money: raised the age limit for cover for the theft of money for which the organisation has responsibility

    —  Business Interruption: cover for loss of income which can be incurred by an event, extended to the event of a patron dying

3.   Do you think the way the health and safety system is perceived by employers, workers and the wider public in Britain has a significant impact, eg on accident rates, or on the way employers act?

  Unfortunately there is a regular stream of media articles that are critical of our health and safety system and/or allege that insurers are blocking events due to health and safety reasons. In our experience, these stories are rarely based on fact. Often organisers are blaming health and safety reasons or insurers when they have wanted to cancel events for other reasons. On other occasions, the health and safety requirements are proportionate to the risk. For example, there was a 2007 story on a Father Christmas being required to wear his seatbelt in his sleigh, even though he was travelling on the road at low speeds. However, this was a sensible safety precaution, as the main purpose of a seatbelt is to protect Father Christmas if another vehicle hits his sleigh. Falls from trailers are common and part of an expensive problem: in 2004-05, the human and economic cost of the fall-from-vehicle incidents was over £36.5 million.[86]

  The price of insurance reflects both the probability of an adverse incident, and the likely costs of such an incident. For example, even when a fireworks display is expertly organised, and a regular event, it still has the potential to cause very serious injury to a number of people, and its insurance will be priced accordingly.

4.   How can good health and safety management best be encouraged and recognised?

  Insurers play a significant role in promoting good health and safety management among employers, through providing extensive supportive material and tailored advice.

  For large employers, insurers will often regularly visit their customers and work with them to identify their risks and develop good risk management practices. A company's performance in managing their risk will be reflected in their premiums.

  For small employers, insurers provide extensive material to help their customers identify and manage their risks. As quoted in the consultation paper, the FSB found that some small businesses find it difficult to conduct their own risk assessment:

  "There are mixed feelings around the risk assessment process; a good proportion of members actually finding it `straightforward' (32%) but still many finding it `quite difficult' (39%) or even `very difficult' (21%) to deal with."

Federation of Small Businesses

  Insurers aim to help businesses conduct risk assessments through their specialised guides and interactive tools, such as podcasts, for particular types of business such as those based in the home, in a shop, salon, office, hotel, restaurant, or surgery. For example, Allianz's subsidiary Premier Line Direct, which specialises in business insurance, has won awards for its tailored products, guides and support for small businesses. Norwich Union Risk Services offer a range of risk management courses both externally and in-house, including those accredited by NEBOSH, IOSH, and IEMA; and Norwich Union offer free specialist advice on their website, with downloadable forms such as accident report forms.

  An underestimated area of work-related risk is driving for work. For large companies, insurers will often visit drivers on site to examine particular risks, and suggest simple solutions, such as painting a line in a parking bay. Many insurers now offer fleet telematics products, which not only provide the usual benefits with satellite navigation, but help employers track their drivers and address any risky driving behaviour to reduce claims in the future. For small businesses, insurers can help employers identify any employees that are driving for work, and ensure they have a driving for work policy in place as well as adequate insurance cover.

  At a market level, the ABI runs the Making the Market Work scheme, which conveys information about trade associations' health and safety schemes to EL insurers, to help members of those trade associations gain access to EL insurance. Making the Market Work currently involves 15 trade associations, representing over 200,000 companies.

As premiums for small businesses may be measured in hundreds of pounds, insurers do not work closely with individual small customers—this would drive up costs of premiums for all small customers dramatically and disproportionately to the risk involved. Furthermore, there is little scope for offering reductions on such small premiums, and as the consultation document observes:

  `Research suggests the size of any discount on premiums needs to be substantial in monetary terms if it is to drive firms to improve their health and safety systems.'

5.   Do you believe fear of compensation claims has any influence on the way in which health and safety is managed? If so, how?

  Department for Work and Pensions' Compensation Recovery Unit data shows that there has been a decline in the number of successful employers' liability claims over the last few years. However, fear of compensation claims is driven more by a fear of being unnecessarily or inappropriately claimed against rather than being claimed against for legitimate reasons. There is evidence that the number of unsuccessful claims has risen in recent years and there appears to be a greater desire among individuals to blame somebody or something for an accident, even when the legal standard of care has not necessarily been breached.

  For example, this is demonstrated by the proportion of "lower quality" claims that are being brought against employers. By "quality", we mean the strength of the claimant's case for compensation. If weaker cases are being pursued, we would expect to see more claims failing to win compensation. A 2005 study by the Centre for Risk and Insurance Studies[87] showed that the proportion of failed employers' liability claims has increased steadily from 2002. While an analysis of the latest statistics from the Compensation Recovery Unit shows that the increase has levelled out, the proportion of failed employers' liability and public liability claims rose from 41% in 2002-03 to 46% in 2006-07. Even where claims fail, defendants still incur costs. These costs are passed on to customers in the form of higher premiums.

  This increasing willingness to bring forward lower quality claims may relate to the excessive legal costs that claimant lawyers are able to claim when they win a case, making them more willing to take on speculative cases. For example, claimant lawyers receive almost as much in costs as claimants receive in compensation for employers' liability claims less than £5,000. This demonstrates the need for urgent implementation of the Ministry of Justice's proposals for reforming the personal injury compensation system.

7.   How can regulators best ensure that employers minimise ill health that is caused or made worse by work?

  Managing and reducing the risks at work that can cause injury or illness is vital, and regulators need to look at how employers can minimise these risks through making more use of occupational health (OH) and vocational rehabilitation (VR). The key to reduced rates of absence is through ongoing systems that support good practices permanently, and less through one-off inspections, assessments and checklists.

  ABI research in October 2006 showed that SMEs are much less likely to provide OH services, with only 14% having an OH department or nurse, 22% using a private OH or VR service, and 18% using NHS OH or VR services. When asked why they didn't use these services, over half of SMEs said they didn't think they needed them, 28% said they were too small, 21% thought they couldn't afford such services, and 12% had never even considered the question.[88]


  Occupational health systems are central to good health at work. Using skilled and well-trained professionals who are present at the workplace, or who can be called upon at any time, businesses can reduce their injury levels, promote healthy lifestyles and practices, identify potential problem areas and improve wellbeing. The World Health Organisation Regional Office for Europe produced its view on the 11 key functions of an Occupational Health Service:

    —  Identification and assessment of the health risk in the workplace.

    —  Surveillance of work environment factors and work practices that affect workers' health, including sanitary installations, canteens and housing, when such facilities are provided by the employer.

    —  Participation in the development of programmes for the improvement of working practices, as well as testing and evaluating health aspects of new equipment.

    —  Advice on planning and organisation of work, design of workplaces, choice and maintenance of machinery, equipment and substances used at work.

    —  Advice on occupational health, safety and hygiene, and on ergonomics and individual and collective protective equipment.

    —  Surveillance of workers health in relation to work.

    —  Promoting the adaptation of work to the worker.

    —  Collaboration in providing information, training and education in the fields of occupational health, hygiene and ergonomics.

    —  Contribution to measures of vocational rehabilitation.

    —  Organisation of first aid and emergency treatment.

    —  Participation in the analysis of occupational accidents and occupational diseases.

  Clearly, not all of these functions are relevant to every single workplace. And even more importantly, many smaller employers cannot afford to invest in comprehensive OH packages, or may consider the benefits to be too small to make this a viable economic choice. The reach of OH services is currently less than we would consider optimal.

  Indeed, the benefits of OH provision are felt most keenly in the smallest firms. The CBI/Axa absence survey of 2007 showed that in firms with between one and 49 employees, an average of more than two days per employee per year were saved through providing occupational health services.[89]

  Employee Assistance Programmes can be a very useful way of addressing the needs of employees when faced with difficulties at home or in their working lives. Offering advice, information and guidance, EAPs are often provided by insurers as part of other packages of employer insurance, such as Private Medical Insurance and Income Protection.

  There are many examples of larger firms who have saved large amounts through investing in comprehensive occupational health services. It is certainly easier for them to do so. In order to spread the benefits of OH across the economy, we may need to consider how fiscal incentives can be used.


  Rehabilitation after injury or illness can be extremely useful in getting people back to work faster, contributing to lower absence costs for employers and better outcomes for individuals. There are startling examples from across the world of how much can be saved by stakeholders through investing in VR services. In other countries, however, VR is much more widely built-in to their systems of employer's liability and workers' compensation.

  VR is an umbrella term for a wide variety of interventions which are based on getting a person back to the workplace, either in their pre-absence role, another role, or even into another workplace. Broadly, these can include physiotherapy, counselling, advice, assessment, case management, negotiation, workplace adjustments, promoting self-management of conditions, career counselling, and re-training.

  Many insurers provide VR as part of Employers' Liability policies for injuries which happen at the workplace. This can help to reduce costs for the insurer by potentially reducing the costs associated with a claim against the insurer. However, this can only make a limited impact on overall rates of absence, as five out of six days lost to absence in the UK are caused by injuries or illnesses that happen outside the workplace.

  There are some attitudinal barriers to increasing the take-up of VR by smaller firms. They may be unaware of the potential of VR, how to get it, when to use it, and its costs. These barriers could be overcome by better use of information, but we will also need to incentivise employers, especially SMEs, to make use of VR.


  Employers feel that, for non-manual staff, OH provision and rehabilitation rank as the second and third most significant positive impact on absence respectively.[90] Given the clear benefits of investing in these, regulators ought to consider how they can promote good health at work by encouraging employers to make that investment.

  Inspections and communications should include information about how to get these services, and promoting the benefits of them.

  The HSE has produced a number of excellent reports and guidance notes on the management and reduction of specific conditions, especially on stress and mental health in the workplace. However, it is difficult to see how businesses without Human Resources or focused OH services can utilise these to best effect. The increasing tendency towards more remote HR functions has led to a lack of skilled and qualified professionals based in the workplace itself.

  To get the best from OH services, an employer needs to develop an individual relationship with the provider. The provider needs to understand the nature of the business, the physical environment, and the types of conditions, injuries, absences that are likely to occur. Tailored services will get the best results. Regulators need to be able to signpost quality services, and be able to inform employers about where to get them, and what to expect from them.

9.   What improvements could be made to help HSE and Local Authority inspectors target rogue employers?

  A clear distinction needs to be made between "rogue employers" and "employers who present the greatest risk". An employer of a small engineering firm may have very good risk management and health and safety policies in place, and yet the type of work employees are involved in still presents a high level of risk. Conversely a "rogue" employer who does not have a health and safety system in place in an office may be exposing their employees to unnecessary risk.

  By definition, insurers sell EL products to the compliant business. What may be most significant in terms of allowing regulators to target rogue employers is information sharing between different agencies, particularly those of the Government. If an employer has been found to be in breach of certain laws and regulations, whether those are minimum wage rules, employing illegal workers, traffic violations, black market activity, etc, then they are also more likely to be running health and safety risks. It is crucial that agencies such as the Police, HM Revenue and Customs, Local Authorities, DVLA, Border & Immigration Agency, Identity & Passport Service, etc, share information that could help to locate and check on those businesses operating at the margins of illegality.

86   HSE website. Back

87   Fenn, P., Vencappa, D., O'Brien, C., Diacon, S., Is there a "compensation culture" in the UK? Trends in employer's liability claim frequency and severity, Centre for Risk and Insurance Studies, 2005 Back

88   Improving health at work: employers attitudes to occupational health, ABI research by Greenstreet Berman Ltd, October 2006 Back

89   Attending to Absence, CBI/AXA Survey 2007, page 26 Back

90   Attending to Absence, CBI/AXA Survey 2007, page 26 Back

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