Caroline Jordan asks whether a separate pool for asbestos claims offers a lasting solution to the problem of longtail industrial disease compensation
As the dust settles following the Barker asbestos case, the insurance industry's already poor reputation is being further sullied. Although not directly involved with the House of Lords appeal, insurers are now viewed as being more likely to hold settlements up, in addition to paying out less. But, could a separate disease pool offer a lasting solution?
It is certainly favoured by AXA's claims director, David Williams. He says, not least, it could settle the ‘gap' in settlements, where there are untraceable insurers and employers.
He sees the pool as part of a revision of employers' liability insurance. Mesothelioma victims, he says, would benefit from settlement by a “government-backed body that deals with quantum and facilitates early settlement of claims, rather than a lengthy search to find employers, insurers, then establish liability and issue a cheque often after the sufferer has died”.
The idea of such a pool was first mooted some four years ago as a solution to the employers' liability crisis. According to Phil Bell, liability manager for Royal & SunAlliance: “The problems with EL have not gone away, we just have a soft market and we still don't know what diseases are out there in the future. I would suggest that claims which appear after five years could be classed as long tail and be dealt with by a separate pool.”
Bell insists the insurance industry would not have to fund the pool. “It would be funded by employers and this would not only boost risk management, but because we could underwrite EL accurately, they would have lower premiums. You would also get rid of a lot of legal costs.” Bell says an employer-funded pool should be on the agenda when the ABI meets with representatives from the Department of Work & Pensions. The department's secretary of state John Hutton recently announced that ways need to be found to speed up payments to mesothelioma victims.
A pool throws up a huge number of issues; not least, there would need to be new legislation to overturn existing EL laws.
Then there is the question of funding. Earlier talks with the ABI focused on employers paying for the pool. But this may prove too problematic and an alternative could be to have an arrangement such as the Motor Insurers' Bureau or Pool Re, which are funded by insurers.
Williams says a “mixed” arrangement where both contribute could be an option. In any case, it appears unlikely the government would be prepared to put any of the burden onto the taxpayer.
But, liability insurers are not all alike. There are some who, even if an employer-funded pool were set up, would not welcome the increased competition that could ensue or the interference in market pricing.
Equally, if it were decided that insurers should fund the pool, deciding on necessary levies would be problematic.
Some, such as AXA, Royal & SunAlliance, Zurich and Norwich Union, have the largest books of asbestos business and so face greater liabilities.
Graham Gibson, claims director for Groupama comments: “In its simplest form, a pool is a great idea, but there are so many difficulties. We only have a handful of cases and so, if asked to contribute, we'd say no. If you had problems though, of course it would make sense.”
Gavin Dollings, casualty manager for Allianz Cornhill says there needs to be far greater detail and agreement. “I'm staying on the fence until we know more.” He says removing much of the administrative paper chase and by-passing lawyers would benefit claimants. But he points out that having fixed awards might not sit well with access to justice. He also asks whether health and safety would still be such a priority if employers knew an insurer-funded pool was in place.
Dollings says: “There would be so many problems around setting tariffs and you would also need clarity as to what constitutes a long tail disease. Then, there would be issues as to who should run the fund. You would also have to prove there would be greater economic stability.”
When the pool was last on the agenda, manufacturers' association EEF said employers would provide the funding providing there was a commensurate reduction in EL premiums, which at the time, were spiralling. EEF's director of health, safety and environment, Gary Booton says: “Who would manage it? We would not want unions, for example, to be administering it and also, you would not want the trustees to have operational responsibility – they should only be there for financial probity.”
Barker could be a pyrrhic victory and turn into PR disaster for the insurance industry.
Rather than tackle the problem, too many are battening down the hatches. When contacted to give a view on a shared pool, typical responses were: “We don't talk about asbestos,” and, “Our people run for the hills – it's too sensitive.”
Fortunately, there are some who are prepared to focus openly on ways forward – as Williams says: “To say Barker looks good financially for the insurance industry is really short sighted, if we can use it to raise the problems of industrial diseases on a wider and more forward looking basis, then surely that is much better.” IT
The way forwar
A disease pool is only one option to tackle asbestos claims. Other possible moves are: