From sun beds to stress Mark Hynes continues his review of emerging risks facing the insurance industry

Sun beds

Malignant melanoma of the skin is a significant cause of cancer deaths.

A study carried out by Newcastle General Hospital has reported that 6% of the 1,600 deaths from malignant melanoma in the UK each year could be linked to sun beds. This equates to around two deaths each week. The study concluded that people should be discouraged from using sun beds, but did not call for an outright ban.

In 2002, a government advisory group working under the auspices of the National Radiological Protection Board recommended that the use of tanning devices and UV lamps for developing suntans should be discouraged.

Potential impact:

As the number of tanning facilities at health/fitness clubs continues to grow, it is possible that injury claims might be received from sunbed customers.

Realisation rating: 3/10

Thames Gateway

The government is planning to build about 120,000 new homes in Thames Gateway by 2016, with 13 of the 14 zones located on the Thames Estuary tidal floodplain.

Potential impact:

The sheer scale of this development presents a huge challenge to the insurance industry due to the proposed construction techniques and its location.

According to the government, a substantial percentage of these properties will be built using prefabricated construction. This technique is largely untested, and we have little information about its long-term resilience to flood, natural perils, fire performance, longevity, repairability and associated costs.

The fact that the development is located on a floodplain obviously brings an aggravated risk, but there is also potential for future claims against building designers and architects to be held responsible for negligent design.

Insurers are working with the government, environment agency and other bodies to achieve a positive solution.

Realisation rating: 6/10

Toxic mould

Of the several thousand types of mould growing in the UK, a small number produces mycotoxins, which may affect health. While effects on the respiratory system are well documented, allegations that they also affect the immune system and memory loss have yet to be proved.

Potential impact:

Some significant awards have been made in the US to building owners, property managers, architects, and contractors such as roofers, plumbers and air conditioning engineers. Very few claims have been made in the UK due, it is thought, to differences in building construction and environmental factors such as humidity.

But, if this situation changes due to global warming, there could be effects on all classes including business interruption for loss of use of buildings, public liability for general injury claims, product liability for materials used and their installation, legal expenses claims in fighting actions and professional indemnity claims against professionals relating to advice given about risks or treatment.

Realisation rating: 4/10

Transfer of risk to society

Insurers are under increasing pressure from the government's desire to move itself further away from primary risks and transfer the costs to other groups in society.

Potential impact:

Insurers are encouraged to retain an ever increasing per event/aggregate limit via Pool Re on terrorism. The fire and rescue services increasingly emphasise the protection of people not property, leading to increased property damage claims. The cost of ambulance attendance at road traffic accidents can already be claimed from the insurer.

There are proposals to extend this arrangement to liability accidents.

The Bain Report on the fire service recommended that fire brigades should be able to recover the cost of attending road traffic accidents and false alarms and for other services such as carrying out inspections and pumping out floodwater. All these are evidence of an interest in transferring risks and costs to the insurance industry which will, in the longer term, result in increased premiums.

Realisation rating: 5/10


spongiform encephalopathy

Spongiform encephalopathy describes a specific type of disease, invariably fatal, involving infection and degeneration of the central nervous system and brain. Bovine spongiform encephalopathy (BSE) that affects cattle, and scrapie that affects sheep and goats, are the most well known examples.

The spread of BSE through the uncontrolled use of materials from infected animals in animal feedstuffs resulted in an epidemic among cattle herds in the UK.

At the same time a similar condition arose in humans, new variant Cruezfeld Jacob disease.

A causal link is believed to exist, although it has proved difficult to construct a strong case of negligence against individual farmers or feedstock producers.

Potential impact:

Although a causal link has not yet been fully proven, the general public are still demanding the removal of even the slightest traces of infected animal components from products. As farmers move away from stockraising as their main source of income, diversification into new areas such as outdoor pursuits holidays pose new risks for agriculture policies.

Realisation rating: 4/10

Workplace stress

The effects of stress in the workplace have been well documented. Caused by a wide range of factors from bullying or discrimination to excessive working hours, it is believed that too much stress can lead to a wide range of effects including raised blood pressure and heart disease.

Research by the TUC shows that more than one in five British workers believe they are stressed at work.

It is estimated that 13. 4 million man-days a year are lost due to stress, costing UK busi-ness around £3.7bn every year. However, the claims incidence remains low in comparison.

Potential Impact:

Stress-related issues can have a profound impact on the physical and mental well being of staff. Employers risk claims for stress, constructive dismissal and legal costs. The primary effect is most likely to be on legal expenses policies from increased numbers of employment tribunal cases.

If the conditions are sufficiently serious to result in bodily injury, however, EL claims might also arise.

The Court of Appeal decision in Hatton v Sutherland [2002] aided employers and insurers by re-establishing principles upon which claims can be considered, namely forseeability and causation, and outlined what employers needed to do in order to discharge their duty of care.

However, while the HSE's recently published code of best practice may help employers to identify and manage potential stress producing situations within their organisation, it could also make it very difficult for them to defend legal action if they have not followed the sound advice and guidance that it contains.

Realisation rating: 6/10

Realisation ratings are defined as the likelihood of a risk occurring and its potential impact on the insurance industry.