Controlling and managing noise exposure is one of the most tangible and straightforward occupational risks to manage and, therefore, by definition, to defend against, so Nick Martens outlines how best to avoid claims and capitalise on your efforts when the underwriter is determining the premium.
Employers’ liability insurance is compulsory for employers and covers them for their liabilities in respect of their employees for injury and disease resulting from the employers’ negligence. Too many OSH practitioners don’t know who their EL insurer is and even among those who do, most aren’t able to communicate with them so as to influence their views when they’re determining the premium. Before continuing with how best to achieve this, it is worth looking briefly at what underwriters do and how they do it in order that the right buttons can be pressed.
Underwriting is essentially the function of:
* assessing the risks;
* establishing the terms of the contract;
* determining the premium.
The process is carried out by an underwriter, who, in the main, will be qualified and experienced enough to make these decisions on behalf of the insurer. In doing so, they effectively ‘underwrite’ or formally allow the employer’s compensation liabilities to be transferred to them. An underwriter therefore makes a judgement as to the size of the premium based on the material facts presented to them during the renewal process. Either way, it involves the application of rates and mathematical models to known company data, such as wage roll and claims history, and knowledge and experience of the industry’s hazards and best practice. Clearly, the underwriter’s judgement will be based largely on claims history. However, a number of other issues will be taken into account, such as:-
>Qualitative issues specific to the risk:
* Assumptions based on the nature of the trade;
* Knowledge of management standards that distinguish it from the industry norm;
* Knowledge of change and desire to improve;
* The management team and competencies;
* Ability to defend claims;
* Working relationship and loyalty.
Social inflation:
* Changes in social attitude and culture;
* Increased medical knowledge;
* Wage increases;
* Rising personal injury awards.
Length of time before claims will be made.
Market conditions:
* Increase in ‘no win no fee’ companies;
* Claims costs and increases in damages;
* Industry and catastrophic losses;
* Conditional fee arrangements.
Increasing illness and disease incidence.
Influencing the underwriter
Looking at the list above, which isn’t exhaustive, the only area where employers have control and can make a real impact, and affect the underwriter’s judgement in respect of the premium, is the ‘qualitative issues specific to the risk’. So what key things can be done to influence the underwriter’s assessment of the risk and, in turn, the premium?
Establish a relationship
The majority of underwriters would be delighted to have a relationship with their client. The nature and extent of the relationship can vary, depending on the size of the premium and the risks involved, and can take many forms, ranging from sending information off to the underwriter as and when you feel it appropriate, through to meeting the underwriter and/or the insurer’s risk managers at regular intervals throughout the policy year. In trying to establish this relationship, make sure you do so through your broker or intermediary, as these people are your professional advisors and conduits to the underwriter and need to be involved to ensure that information is presented correctly and in a way that most impacts.
While most brokers will gladly and professionally facilitate this process, there are a few paranoid brokers who don’t like the idea of insurers and insured having a direct relationship with each other. Should this be the case, report this to your company’s risk manager/ financial director, or person responsible for procuring the insurances, and contact your insurer directly. Remember, they’re paid by you to provide a professional service, so don’t tolerate any poor performance. From here you can arrange to either meet or communicate with the insurer as you both see fit but, most importantly, get their attention.
Stick out from the crowd
Insurers in general use generic industry data, have general assumptions about how risks are managed, and generally assume that if controls are in place they’ll be of a nature being generally applied by most of their clients. The reason for this is not that insurers can’t underwrite ‘specifically’ but that the lack of information and dialogue forthcoming from clients makes it difficult to consider businesses in a bespoke manner.
To avoid being regarded as ‘run of the mill’, stick out from the crowd. A good example of this would be to demonstrate your understanding of the new noise regulations and of their requirements. This could be achieved by using the practical framework for protecting workers, managing noise risks and complying with the regulations outlined in the ‘Sound advice’ article elsewhere in this issue, namely:
* the way in which your risk assessment has been conducted, the things it considered, the machinery that was used and the competency of your assessor;
* the action taken to reduce noise exposure in the form of an action plan detailing, inter alia, engineering modifications and responsibilities;
* timescales for action.
Put your efforts into context
One of the biggest criticisms that underwriters face is that they don’t reward businesses for the things that they promise to do in the future. That’s because underwriters know that what people say they’re going to do and what they actually do are often two different things. While they do listen to what is being said and make judgements about its adequacy and likelihood of it being carried out, they rely heavily on claims experience as this is the most accurate information on the performance of the business that they have. Therefore, it is vitally important that you can demonstrate the implementation of key initiatives and investments, improvements to your system, and important milestones over a long timeframe – for example:
* an improving claims development graph;
* improved purchasing policies;
* key engineering and noise-reduction initiatives/investments;
* previous risk assessments and control measures/ improved systems of work;
* pre-employment, para-employment and post-employment occupational health/audiometric data;
* successful defences;
* clear details of the current position;
* dates, photographs, old inspection reports, HR records, PPE records and purchasing data, etc;
* current detailed action plan to comply with the new regulations.
Updated noise policy
The policy should detail who does what, when, and in which circumstances, and should contain all requisite information on PPE, octave band analysis, layout drawings, and details such as hearing protection zones, PPE, signage, storage, procedures, information shared with employees, instructions to them, and training given.
Checks
As with most policies and systems, they are only statements of intent and underwriters know this. To stand out from the crowd and to make the difference you want, show evidence of regular monitoring and auditing. Even better would be to show evidence of disciplinary action taken for, say, employees either not wearing hearing protection, or not wearing it properly. This is particularly important to underwriters as they experienced a sustained improvement in noise-induced hearing loss claims throughout the 1990s only to see it deteriorate again over recent years through the incorrect and poorly enforced wearing of PPE. If this could be further reinforced by verification from independent inspectors and auditors, it would prove even more valuable.
Conclusion
It’s easy to say that managing noise is relatively simple and straightforward but in my view it actually is. Once you’ve developed your system and you want to check its robustness, look back at some old noise-induced hearing loss claims and see if there are any lessons there to be learned. Likewise, ask your insurer’s risk managers or claims inspectors to comment on your systems and controls, as they’ll gladly help and are well positioned to do so. After all, it’s in their interests also that claims are well managed and that systems are robust.
While the robustness of your noise management system is very important, to make it count for anything with your insurer, seek to establish and maintain a relationship with the underwriter. Remember: unless you inform the insurer of the progress that you’re making and of the controls that you have in place to manage the risks, it is likely that it will be ‘generically’ considered and you won’t be credited for your hard work and commitment.
Lastly, and irrespective of what levels your employees are exposed to, focus on health surveillance before and during employment. In a world where litigation appears to be increasing, claims are being actively encouraged, and more onerous legislation is about to unravel, establish a relationship with your insurer and don’t let your efforts fall on deaf ears!
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