The law governing EL cover is 20 years out of date. And the problem can only be solved with the government's help. Delay is dangerous, John Jackson says
The crisis surrounding the problems of liability cover for companies large and small is too big for the insurance industry to tackle alone. Parliament, business itself and the government need to become involved.
The central problem is that the UK is operating an employers' liability (EL) law that is 20 years out of date - indeed parliament approved the legislation 23 years ago.
Unfortunately, the UK is lagging behind in tackling this issue. Delay is potentially disastrous. One way out of the crisis, as recommended by Biba, is a pooling arrangement similar to Pool Re on terrorism cover.
This is already taking hold in the US. In Texas, for example, there is a storm protection scheme available through a pooling arrangement.
What is frightening is the wide variety of businesses either failing to find EL cover or taking a chance and operating illegally without cover.
Because they cannot obtain insurance, firms like scaffolders are going out of business, along with children's homes, private mines and haulage contractors.
Among firms carrying on business without EL insurance are coach operators, consulting engineers, couriers and roofing contractors.
A potential disaster is just around the corner unless action is taken.
In one case, a broker was asked to find cover for an Essex childrens' home. That home, in turn, was contacted by people running similar homes asking how they could also obtain cover.
This situation cannot be allowed to continue. First, there needs to be a major educational blitz by insurers and brokers to bring home to firms the necessity of good risk management procedures.
The government should back that public relations exercise.
Second, consideration should be given to providing a cap on liabilities for insurers, who should operate a pooling system. Third, there needs to be an urgent review of the 1972 EL Act of Parliament. It needs to be scrapped, or at least drastically amended.
The world has moved on since the days of kipper ties and flared trousers. We live in a madhouse litigation society, where ambulance chasers have encouraged an atmosphere in which insurers (and brokers) are seen as fair game.
What is scary about all this is that right now these companies are folding, being refused cover, or continuing to operate illegally. It is not crystal ball-gazing. It is business Britain today.
The industry needs to lobby parliament urgently, to persuade a select committee (possibly Treasury) to take up this issue. The government also needs to become involved.
The government carefully monitors the feel-good factor in the business world. Anything that detracts from the nation's business community being less than happy bunnies sends alarm bells ringing through the corridors of Whitehall.
This is also a matter for industry itself. Both the CBI and the TUC need to come on board. Business falling by the wayside is not good news for employers, and the subsequent job losses are equally bad news for the unions.
A big wake-up call needs to go out loud and clear. Time is not a luxury that government, business, insurers or brokers can afford.