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October 11, 2009

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Businesses ignorant on liability insurance

Nearly two thirds of businesses in the UK do not understand their legal

obligations in relation to employers’ liability cover, a new study

indicates.

Research commissioned by AXA Insurance, in association with the British Chambers of Commerce, suggests that 85 per cent of organisations currently hold employers’ liability (EL) insurance. Of the remaining 15 per cent that answered the survey, 10 per cent are sole traders — leaving 5 per cent of businesses that employ people holding no liability protection for their staff. Only a third (34 per cent) understand their legal requirement to cover employees through EL insurance.

The recession is also causing firms to look at reducing their insurance cover, the research has found. In the last year, around 15 per cent have considered cutting back on their insurance, while 5 per cent have already cut back on their level of cover.

In response to this finding, AXA warned that many companies were leaving themselves exposed in the event of a claim — pointing out that 13 per cent of businesses have less than £1000 disposable cash and 48 per cent have less than £10,000.

The research, which also quizzed employers on other types of cover, found that less than half of employers have read their insurance documentation and only 23 per cent keep it in a secure filing system. Four per cent of employers admitted they had no idea what was covered by their various insurance policies.

From the employee viewpoint, an encouraging 89 per cent of staff were aware that insurance exists to cover them for accidents at work, but 36 per cent had never been given any information about their employers’ insurance terms.

Commenting on the study, Doug Barnett, head of customer risk management at AXA, said: “These statistics should be a wake-up call to all businesses and the insurance industry alike. With the economy as precariously positioned as it is at the moment, the last thing needed is more businesses needlessly going to the wall because they are not properly insured.”

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