In June 2000, the Government launched a major new strategy entitled Revitalising Health and Safety. This strategy has been hailed as the most significant development in occupational safety since the Health and Safety at Work Act was passed some twenty five years ago.
The 1974 Act had a powerful and lasting impact. Workplace deaths are down to around a quarter of the level they were in 1971. Britain has a work-related fatal accident rate around half that of Germany, and well below that of most other European Union countries. However, the numbers of fatal and major injuries have remained stubbornly static for the past few years. The Government estimates that health and safety failures cost the economy £18bn per year. The cost of some of these failures is borne by the insurance industry.
Hence, the aim of the Revitalising Health and Safety strategy document is to inject new impetus into health and safety at work.
The strategy sets out challenging targets for improvements in health and safety performance. The government hopes to reduce the number of working days lost due to accidents at work by 30% by 2010, and the numbers of fatal and major injuries by 10%. Work-related ill-health is hoped to be down by 20%, with half of this improvement to be achieved by 2004.
In order to deliver these improvements, the document sets out a 10-point strategy statement and a 44-point action plan. Some of these points deal directly with the insurance industry, and many others have considerable implications for insurers and intermediaries.
The strategy document states that the compensation, benefits and insurance systems must motivate employers to improve their health and safety performance, in particular by securing a better balance in the distribution of the costs of health and safety failures. When things do go wrong, employers must also be committed to rehabilitate injured workers, so they can continue to work in the future. The Government sees a case for reforming the arrangements for employers' liability insurance in pursuit of these goals.
Insurers also need to motivate employers to improve their health and safety performance. Insurance companies are able to visit far more workplaces than the Health and Safety Executive and the purposes of their visits have elements in common. Both are interested in assessing the level of risk created by workplace activities. Both have some means of persuading employers to improve standards of health and safety. It is tempting to view insurers as an additional enforcement agency.
Assessing risk management
In practice, there are barriers to insurers using the premium as a lever to exert greater pressure on very poor performers. Fully assessing an organisation to make the judgment that risk management activities are effective takes time and resources from the insurer. These resources may be appropriate for larger businesses in higher hazard sectors, but for small companies, where the premium income is low, it may be difficult to justify the costs of such a risk assessment.
The strategy statement recognises the difficulties inherent in this situation. A key issue for consideration is how the current practice of adjusting premiums and providing advice might realistically be transferred to lower hazard sectors and smaller businesses. It cites, as an example, the questionnaire on health and safety that the Association of British Insurers is looking to develop, to ensure that health and safety information is presented in a uniform format. This would lead to a better, informed assessment of risks and the measures necessary to control them.
The Government is also seeking to secure higher levels of compliance with the Employers' Liability (Compulsory Insurance) legislation, and will be authorising more HSE inspectors to enforce this legislation.
Many insurance companies have been pro-actively seeking to provide risk management advice to their insured clients. Unfortunately, many companies view the advice provided by insurers with suspicion, and see risk improvements arising from insurance surveys as being only of benefit to the insurer as a means of minimising claims. In fact, research by the Health and Safety Executive shows that the uninsured costs of accidents exceed insured costs by between eight and 36 times, depending on the industry. The Government recognises the importance of demonstrating to business the cost-benefit argument of preventing accidents and ill health. The first action point says: "The Health and Safety Commission will publish and promote a Ready Reckoner, supported by case studies, to drive home the business case for better health and safety management."
The Government has expressed its gratitude to the insurance industry for agreeing, in principle, to circulate the Ready Reckoner documents, with employers' liability insurance renewals.
As well as the specific initiatives in adjusting EL premiums to reflect risks, and distributing information on the business case for improved management of health and safety, the Government also stresses the general importance of involving the insurance industry in the development of health and safety policy.
An issue, which is pressing for both the insurance industry and the Government, is occupational health. Claims for ill health account for half of all employers' liability claims. Of these, most claims have been for occupational deafness. In the future, the number and type of actions for occupational ill health are likely to continue to increase.
A number of Government-backed initiatives are already under way. The Back in Work programme was launched in May 1999 to tackle back pain as part of the Healthy Workplace Initiative. The programme is supporting and evaluating a series of pilot projects to determine what is best practice in this field, with the aim of promoting such good practice throughout the industry.
Return-to-work rates for seriously injured people in the UK are less than half than those in the US and less than a third compared to Scandinavia. It is estimated that 25,000 people leave the workforce each year as a result of injury or ill health caused by work. The consequences for the individual are obvious, but the consequences for the employer and society as a whole are also significant.
Co-ordinating rehabilitation
Why has rehabilitation, if it is so self-evidently a good thing, been slow to progress in this country? One explanation may be that the most common reasons for long-term absence are some of the most controversial. Stress, RSI and back pain account for over three-quarters of all work related absence. All of these conditions will benefit from early intervention, yet employers may view all of them as easy for the work-shy to fake.
One issue delaying progress is the lack of resource allocated to co-ordinate rehabilitation efforts. The Government recognises that the current arrangements for co-operation between employment, health and social services are patchy and are not often focused on helping the person concerned to return to work. Action point 30 is aimed at rectifying this deficiency.
It says: "As part of the next stage of the New Deal for disabled people, the Government is considering how best to strengthen retention and rehabilitation services for people in work who become disabled or have persistent sickness."
The way employers' liability insurance operates has been a hindrance to the development of rehabilitation strategies in the past. However, in 1999 the International Underwriting Association/Association of British Insurers Code of Practice on Rehabilitation was published. The code places a duty on both sides, following an accident, to make an assessment of how the quality of the victim's life can be improved by early intervention. The insurer will then fund reasonable recommendations of the assessment report by way of an interim payment.
There are substantial benefits to insurance companies, if standards of health and safety in the UK improve. The employers' liability market is already pressured by the rising costs of claims. Extrapolating current trends, both the value and number of claims for ill health, RSI and stress are likely to continue to rise.
The Government's aim is a major reform of the compensation, benefits and insurance systems to act as a powerful new lever to raise health and safety standards.
It intends to achieve this by increasing the proportion of costs borne by those responsible for health and safety failures, thereby strengthening their motivation to raise standards and employers' investment to keep victims in work.
