As if insurers themselves weren't pressurised enough by having too much to do and huge responsibility, they now face the added worry of growing claims for work-related stress. Jack Hurst reports....

Hardly a day goes by without some story on stress hitting the headlines. Whether it's about a court settlement or a despairing farmer drowning his sorrows with a bottle of disinfectant, stress is big news.

Insurers face a double whammy. Insurance companies themselves, following various mergers and acquisitions, are among the most stress-ridden organisations in the UK. Then there is the litigation time bomb about to explode, which could seriously damage the balance sheets of insurers with large employers' liability exposures.

Stress is not a new phenomenon. The adrenaline rush it is associated with has helped mankind survive since the Stone Age. The fight-or-flight reaction is very useful when being attacked by a pack of wolves.

According to medical experts, the body reacts in the same way when faced with a persistent low-level threat or worry. If the body cannot release the pent-up energy, it stores it. Over time, this affects the ability to make sound judgments and can impair health.

The early warning signs might include disturbed sleep, sudden weight gain or loss, headaches or making uncharacteristic mistakes. If these signs are not heeded, damage to the immune or cardiovascular system, depression or breakdown can follow.

Stress is different from pressure. Everyone needs occasional pressure to achieve professional and personal growth. However, too much pressure, or sometimes too little (being bored is one of the worst things), can result in stress.

Professor Cary Cooper of the University of Manchester warns that work-related stress levels are higher in the UK than in any other European country, and he predicts a further rapid rise in the next decade.

“There is now job insecurity from the top floor to the shop floor,” he says. “Businesses have become too lean and too mean for anyone's good.”

Cooper also points out that Britain's working hours are the longest in Europe. He says that if people consistently work more than 41 hours a week, there is a clear-cut link to ill health.

Employers can measure the cost of stress in terms of absenteeism, staff turnover, accident rates and reduced productivity.

There is also what JC Quick, of the American Psychological Association, describes as “organisational dysfunction”. With most British managers working more than 41 hours per week, and 10% working more than 60 hours, there is a real danger that stressed managers will do serious damage to their organisations.

Separate studies in the UK and Scandinavia suggest that stress accounts for 10% of work-related illnesses. The Health and Safety Executive calculates that this equates to 36 million working days lost annually in the UK, costing employers more than £1bn. Cooper reckons that, when allowing for other factors such as reduced productivity, the true cost to British industry is nearer £4bn.

On top of this, there is now the serious risk of litigation against employers who have no stress prevention policy. The awards can be huge. Zurich Municipal paid more than £250,000, on behalf of Newport Education Authority, to a teacher who suffered two nervous breakdowns from the pressure of teaching special needs children without the proper back-up.

Nigel de Gruchy, the general secretary of teachers' union NASUWT says that his union is dealing with 120 stress-related compensation claims at any one time.

Number one work hazard
A recent Trades Union Congress (TUC) survey of safety representatives identified stress as the number one workplace hazard. Critics say the TUC encourages disgruntled employees to take unjustified action against employers. Whatever the truth, risk managers are recognising the potential for increased litigation. For example, a survey by the Association of Local Authority Risk Managers showed that 85% of public sector risk managers identified workplace stress as one of the most important emerging risks.

In the UK, the common law duty of care that employers owe their staff applies as much to stress as to other workplace hazards; as does the Health & Safety at Work Act, 1974. Litigation may also arise under the Sex Discrimination Act 1975, the Race Relations Act 1976 and the Disability Discrimination Act 1995, particularly as groups affected by discrimination tend to suffer high work-related stress levels.

Under the EU Framework Directive 89/391/EEC, employers have “a duty to ensure the safety and health of workers in every aspect related to their work”. The directive sets out the following general principles of prevention:

  • avoiding risks
  • evaluating the unavoidable risks
  • combating the risks at source
  • adapting the work to the individual, especially regarding workplace design, equipment and production methods
  • developing a prevention policy that covers working conditions, technology, organisation of work, and social relationships.

    Stress is not regarded as a medical condition in itself. A claimant must therefore show that he is suffering from a recognised and foreseeable medical condition brought on by circumstances at work, and that the employer did not take adequate steps to alleviate the situation.

    The case of Walker vs Northumberland County Council shows how a court applies these principles. Walker was a social worker who had a psychiatric breakdown (a recognised medical condition). He had already had a breakdown following an increase in his workload, and he had told his employers that he was struggling to cope (therefore making the problem foreseeable). But the council did not reduce his workload (an inadequate response).

    To guard against prosecution, all employers should have a stress prevention policy. This will help in any defence and also enables an employer to recognise and deal with potential problems before they escalate.

    Professor Lennart Levi, emeritus professor of psychosocial medicine at Sweden's Karolinska Institute, conducted a study for the European Commission to identify the main causes of work-related stress.

    Crippling workload
    Levi found that the most common factor, across all countries and occupations, was work overload. This was particularly acute when employees' authority to make decisions and influence their own conditions was low.

    Workers are often able and willing to tolerate a high workload if they feel they are trusted to decide how best to cope. But without this sense of empowerment, a challenging work situation becomes a distressing one.

    Another big factor was inadequate training. An employee may be moved to another position without the necessary training. Under these circumstances, even quite a modest workload can become heavy, because the employee is not competent at the new job and feelings of uncertainty, insecurity and failure follow.

    Bullying, threats of violence and discrimination are also major causes of stress. Bullying might stem from a macho management culture that has little regard for employees' sensibilities.

    Discrimination can be based on race, religion, sex, age, disability or virtually any other characteristic. It might be active, as in verbal or physical abuse and exclusion from social networks. Alternatively, it might be passive, where the employee is refused a deserved promotion.

    Stress can arise where employees' efforts are not matched by rewards, in terms of appreciation, praise, remuneration, status or advancement. Absence of criticism does not equal appreciation. Neither does praise replace tangible rewards for a job well done.

    It is often forgotten that the boss, too, needs some support. It is usually lonely at the top. Never hearing any praise from colleagues, except from those who have a vested interest in expressing it, may become very frustrating.

    Large parts of the workforce are living under the increasing threat of redundancy or have fixed-term contracts. For the young, healthy, well educated and resourceful, particularly those in the information technology sector, this may offer a challenge rather than a burden. However, many people find the uncertainty oppressive.

    Accident waiting to happen
    In many occupations, such as air traffic control, health care and even insurance underwriting, small misjudgments and mistakes can have disastrous consequences, either economically or in terms of other peoples' well-being. If there are heavy work pressures and tight deadlines, stress levels are likely to become intense.

    Levi also demonstrates that if the causes of stress are understood, it is relatively easy to eliminate them with simple organisational changes.

    Examples include ensuring employees have adequate training and time to complete tasks, matching responsibility with authority, defining roles, rewarding good job performance, encouraging social interaction and support between fellow workers, and outlawing bullying and discrimination.

    However, more support from the top is essential. Without it, few line managers will risk implementing a strategy themselves.

    Some approaches to combating stress focus on the cure. Provide a gym, an occasional massage and some counselling, some companies reason, and it doesn't matter how hard you flog your employees. But while these measures are useful at times, the emphasis should be on prevention rather than cure.

    Levi found that the cost of work-related stress was similar to hazards such as noise and carcinogens. Few seriously doubt the importance of eliminating these, so Levi argues that “stress prevention should be among the top priorities in occupational health and safety policies”.

    Insurers can play a key role in helping reduce work-related stress, by encouraging policyholders to implement stress prevention policies and by reflecting this in their pricing of risks.

    Perhaps, though, insurers need to get their own house in order first and ensure they have such policies in place themselves.

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