We must address the EL crisis
John Parker, head of general insurance at the Association of British Insurers (ABI) said (4 July Insurance Times): "The current employers' liability (EL) system is not sustainable and the industry should not expect immediate action. It is unrealistic for a government to tackle this issue mid-term. We think it would be suitable for the next term."
This statement clarifies the position in respect of the continuing placement of covers.
Brokers and insurance buyers were given assurances from Treasury that the ABI would intercede with its member insurers. It was hoped that the ABI would bring pressure to bear on insurers to renew or find minimum levels of cover.
But, in view of what the ABI has now said, are we not losing sight of the client here? Should we be bringing pressure on the entire market, companies and Lloyd's syndicates alike, to seek a solution which will enable clients to continue to provide jobs for their workforce?
We are aware of some of the major problems. I have personally spoken to a well-known Lloyd's liability underwriter.
He has bemoaned the problems with capacity, regulation and continuing spiralling awards and legal costs on bodily injury claims.
Are we alone with this type of problem? No. Australia has encountered similar difficulties, but has passed legalisation, which caps the amount the insurers pay. When insurers and underwriters realise they can make a profit out of EL and public liability (PL) covers, but not within these shores, what chance of continuing commitment to the UK market?
So, where does this leave UK plc? Is the ABI right to say that the system is "currently unsustainable"? Are insurers right to refuse to renew a clean risk just because it is a high risk liability?
Surely, without providing EL cover the client base will go into liquidation. The company closes down, people lose their jobs. But it does not stop there. The trading companies consolidate and fewer companies trade, which means greater exposure for the insurer who does decide to write that class.
It gets bigger and more insurers become unable to assist. This may sound dramatic, but we need the smaller operations. They are our bread and butter.
So what is the answer? Let's hope the next round of reinsurance renewals will add capacity to the market and that those businesses facing ruin will be able to pick themselves up and continue to trade.
Let's also hope that insurers and Lloyd's syndicates will reconsider their actions and offer affordable cover to UK plcs.
Peter Staddon
Technical services manager
Biba
