A fire or other incident can tear a business apart, sometimes in a matter of minutes, and insurance provides a vital safety net. Employers must be prepared to compensate injured employees and customers and the Health and Safety Executive enforces the law on Employers’ Liability Insurance with fines of up to £2,500 for each day without insurance. Insurers price their products according to the likelihood of a claim, and the likely size of that claim. Naturally, insurers want to avoid large pay-outs so offer advice on reducing risks. It’s important to remember though that, insurers complement the regulatory system, they are not regulators and they deal with civil, not criminal, liability.
Some insurers now check health and safety arrangements before they offer cover and, whilst useful advice has been given, some demands are way beyond what is legally required. Remedial actions, described as ‘mandatory’ or given a ‘priority’ rating are often accompanied by tight deadlines and incur costs up to several thousand more than was saved in switching to a cheaper insurer. The small print reminds you that failure to carry out specified actions may result in termination ‘…and/or the repudiation of any subsequent claim arising from such non-compliance.’
It’s a risky business being refused cover by an insurer so understandably many will ‘just do it’ through gritted teeth. But can you challenge demands you believe to be excessive?
The Association of British Insurers (ABI) promotes best practice within the industry and says that guidance ‘… should be aimed at improving the resilience of your business in dealing with civil law claims made against you, and will be proportionate to the level of risk involved.’ Under the Health and Safety at Work etc. Act 1974 you must ensure, so far as is reasonably practicable, the health and safety of employees and others who may be affected by work activities. The ABI states, in its advice to small/medium sized businesses:
- Your insurer will not refuse to pay a claim purely because of a breach of health and safety regulations
- Your insurer will not withdraw cover mid-term purely because of a breach of health and safety regulations
A typical example is an insurer ‘requiring’ a Company to inspect and test all its electrical equipment -within two months at an estimated cost of £1-5k. Fear of being uninsured led to immediate compliance. Others have proceeded to test all electrical equipment, including double-insulated and even newly purchased equipment.
This is clearly wrong so can be challenged. Equipment must be maintained in good safe condition and your own risk assessment determines how you achieve that; there is no specific requirement for portable appliance testing (PAT). Visual checks by users may be sufficient to prevent danger in low risk environments. In more risky settings, whilst some basic electrical knowledge is necessary for inspection or testing, it really isn’t true you have to be qualified to change a plug.
In another case, the landlord of a retail store told its Manager that the insurer required a DSEAR (Dangerous Substances and Explosive Atmospheres Regulations) risk assessment because of the aerosols that were sold. Aerosols if heated can explode and make it unsafe for firefighters to enter premises. However an enforcement officer subsequently advised the Store Manager that a single general risk assessment should incorporate aerosol risks and that in these circumstances a separate DSEAR assessment wasn’t necessary.
Other erroneous advice has included the supposed ‘legal requirement’ that a security company must be the key-holder for the intruder alarm and not the nominated employee, and that permits-to-work must be in place to control all contractors. Both untrue. Suitable measures can be devised to protect lone workers, and, whilst contractors’ activities must be managed, permits to work are devised to control higher-risk activities not clearing gutters.
What to do?
If an insurer requires measures you don’t feel necessary, what should you do?
- Don’t panic. Read the report again and distinguish between requirements and recommendations. Cover will depend upon requirements being addressed; ignore recommendations if they won’t benefit your business.
- If requirements seem excessive or conflict with previous advice check with your health and safety consultant who knows the circumstances of your workplace
- Remember your broker acts for you not the insurer. If you don’t accept the findings of the survey or the effect on your premium, ask your broker to find another provider
Should you just comply?
This depends upon the measures you currently have in place, how true a picture the surveyor had during the visit, what information was available and how risk-averse their attitude. In view of some of the excessive demands it would be wise to have another perspective.
If arrangements aren’t as good as they should be you will be seen as ‘high risk’ and charged accordingly. You want to be seen as a ‘fair’ or ‘low’ risk to achieve a lower premium.
Good risk management and good health and safety advice should lead to lower costs and premiums. Your Alcumus Health and Safety Consultant applies knowledge of the law, Approved Codes of Practice and other guidance to the circumstances in your workplace and is able to advise on any additional requirements.