Employers' liability (EL) premiums are forecast to increase by an average of 30% in 2004 as problems in the EL system are far from resolved. But, as Michelle Hannen reports, work is underway to create a system to benefit both policyholders and insurers.
After the Department for Work and Pensions (DWP) released its second report into EL last December, the insurance industry held its breath, concerned that it could be yet another case of all talk and no action.
But since then an agenda of work has begun in earnest with several initiatives and pilot programmes expected to be up and running by summer.
Low value claimsOne area of work the DWP is promoting is the early active management of claims by both insurers and employers. The head of the DWP's health, disability and work division, Gareth Williams, says management of claims would help to create a more cost effective approach to handling EL claims.
Speaking at the recent QBE Insurance annual conference, ABI head of liability Paul Fegan said that about 90% of EL cases are simple and straightforward enough for insurers to admit liability straight away, and it is claims such as these that the DWP is targeting for early intervention.
Insurers, unions and solicitors were involved in initial discussions last October about developing a non-adversarial system for handling lower value cases, typically for claims of £10,000 or less. The manager of QBE Insurance's complex loss team, Mike Noonan, says insurers are now developing a proposal to put to the DWP and other stakeholders. Noonan says key features of such an initiative are that it is claimant-centred, with claims initiated by the employee without the involvement of a solicitor.
He says legal representatives could become involved to negotiate settlements, but it is up to insurers to prove that such a proposal to cut costs involved in the claims process would not impact on damages awarded. "The onus is on us to actually really make this work," he says. "We need to build up some trust." If an agreement can be reached, Noonan says a final proposal for the system could be in pace by March or April, with year-long pilots between selected insurers and employers commencing in the summer.
NHS recoveries However, further clouds loom on the cost horizon, as policyholders with 1 April EL renewals face additional premium increases of up to 5%. The increase results from powers granted to the NHS, which, from 1 November this year, will be able to recover treatment charges from EL insurers for accident injuries occurring on or after that date.
With 1 April one of two major dates for EL renewals, Noonan said policyholders renewing on that date will be first to feel the impact, as the NHS recovery scheme will be in effect for five months during the life of those policies.
Works continues on the case for the separation of long tail disease claims from accident claims, with work continuing on the PricewaterhouseCoopers report being produced on behalf of the ABI. The DWP has stated that it is "unconvinced" about the need for such a fund, and Williams says that one of the DWP's concerns is that it may act as a deterent to the health and safety improvements being promoted on the back of increases in EL premiums. Fegan says that in order to convince the DWP, the ABI hopes to present them with a solution rather than just a report. To that end it has recently held talks with other stakeholders, including the CBI and the Engineering Employers' Federation, and will soon speak with the TUC and Federation of Small Businesses, in order to try and develop a solution which is supported by all stakeholders.
Rehabilitation Increasing the use of rehabilitation is also a DWP priority; indeed Williams calls the recent noises from government on the issue its "clearest commitment ever" to vocational rehabilitation. In order to promote its increased take up, the DWP is developing a process map to assist employers with putting effective rehabilitation plans in place. A report on this research is due to be released by the DWP in the late summer.
