Large companies are still underestimating the cost of their employers' liability (EL) risks, according to Marsh.

Andy Welch, a managing consultant in Marsh's risk consultancy practice, said that when considering the cost of EL risks, companies fail to include claims and injury management costs.

"Companies do not understand and are always surprised at what their total cost of this risk is," Welch said.

In order to aid its clients, Marsh has developed an EL risk management tool, which it can use to assess and quantify client's health and safety performance as well as claims defence and injury management procedures.

Welch said the tool can be used to assess any business, but it is aimed at larger companies, generally with more than 100 employees, in sectors with complex risks such as manufacturing.

Company performance in a number of areas is graded by a Marsh risk management consultant from one (excellent) to five (poor). This information is then benchmarked against sector averages for comparative analysis, and a summary is supplied to the company as well as underwriters.

In order to establish the company's total EL cost, data on absence and accident rates is collected and industry benchmarks are used to show comparative costs. Clients also receive a report with recommendations for improvement, with details on how the recommendations will reduce costs.

Marsh began using the assessment, which its broking clients can choose to have at an additional cost, in June.

He said the response from insurers has been "very favourable", and in some cases companies have found more insurers willing to provide a quote and achieved lower than expected premiums.