A recent government report urged insurers to do more to promote good health and safety practices. It challenged us to exert greater pressure on very poor health and safety performers, and asked how the scrutiny we apply to large businesses might be brought to bear on smaller ones.
This raises some interesting questions. Do insurers do enough to promote health and safety? Or is the government asking us to do some of the things the Health and Safety Executive (HSE) should be doing?
The first point to make is that we can be proud of what we already do. There are some excellent examples of good practice among Association of British Insurers (ABI) members. One company, for instance, is retraining its entire surveying workforce in order to increase their knowledge of health and safety law and good practice. Another has launched a website for young workers that includes lots of health and safety tips. And here at the ABI, we run a joint course with Rospa to keep insurance underwriters and surveyors fully up-to-date on health and safety issues.
In addition, a number of companies specialising in employers' liability insurance also offer fee-based consultancy services, which bring their expertise on health and safety compliance to a wide range of clients.
We're also very keen to work with the HSE on its long-term strategy. The ABI has excellent relations with HSE officials, and member companies are always ready to nominate their expert staff to relevant HSE advisory committees. But we must be selective: HSE has over 20 advisory committees and we shouldn't forget that insurers have to spend most of their time running their businesses – not the government's bureaucracy.
In short, there is a limit to how far “public good” activities – not directly paid for by consumers – can be shouldered by the industry.
It makes sense, for instance, for an insurer to take considerable pains when underwriting large employers' accounts. Premiums can be – and often are – loaded by as much as 50% where health and safety risks are high, with discounts of around 20% if the assessment is favourable. But, for smaller businesses with lower premiums, discounts would have a relatively limited impact, so would not offer the same incentive to improve things.
Another point: where premiums are small, it simply may not be cost-effective for an insurer to send a skilled inspector to the premises.
And the cyclical nature of insurance prices can complicate things too. When competition is driving prices lower, any insurer who penalises poor health and safety standards with higher premiums could find himself undercut by a less choosy and scrupulous competitor.
But none of this undermines the need for insurers to continue looking energetically for new ways of incentivising businesses. Good research, carefully thought through questionnaires and good practice in analysing claims all have a part to play.
Everyone has an interest in good health and safety: Employees do, obviously, and employers, because it saves them time and trouble in the long run.
And, yes, insurers do too. Even from a purely commercial standpoint, firms that are serious about health and safety issues are likely to take their environmental, fire and employment obligations seriously too – and present a better all-round insurance risk.