If the total cost of employers’ liability insurance claims is going up, how come the long-term trend in the actual number of claims is going down?
This is the question that Zurich Insurance plc’s Spencer McCabe set out to answer for delegates attending the ‘Responding to economic uncertainty’ stream at the IOSH conference today (16 March).
Spencer – a registered nurse and now manager of Zurich’s medical management centre – kicked off with a graph, which illustrated that, over a ten-year period, from 1999 to 2009, the total cost of all EL claims rocketed from £400 million to £1000 million. The net effect of all of this cash being paid out, he said, is that premiums go up, costing employers more.
But against this background, the view from insurance underwriters is that, in the long term, accident numbers – and, therefore, claims – are decreasing and the reason why costs are not similarly reducing is that individual claims are costing more.
Increased incidence of redundancy and site closures could contribute to a rise in claims, as employees lose their sense of loyalty to the company and thus are more likely to pursue a claim against it. Individuals’ personal circumstances in these straitened times are also a factor, as are the influence of the media and the activities of claims farmers.
Spencer added: “Other factors are that there is less hazardous activity nowadays, and better risk management is making the work environment safer. The concern now, though, is: will employers stop investing in risk management for financial reasons? I cannot emphasise the importance of risk management enough in terms of avoiding claims. It is essential, and has a direct influence on premiums. Basically, preventing accidents in the first place is the most efficient way of avoiding claims.”
But equally important, he said, is for employers and insurers to work together and to be proactive once an incident has occurred. Early notification by the employer of an incident is crucial to enable the insurer to act quickly, in terms of offering and facilitating treatment for the employee with the aim of returning him or her to the workplace as soon as is appropriate.
Explained Spencer: “If the injured guy is just sitting at home on the sofa, and his injury or illness is not being properly managed, at some point in the future he will probably make a claim. That will be the first time your insurer hears about it, at which point the window of opportunity to do something about it has closed. So, you need to tell your insurer about the incident when it happens to make sure the best outcome for all parties is achieved.”
The key, said Spencer, is to “move away from a claims culture towards collaborative solutions. This means avoiding the need for lengthy investigations to establish liability and consequent delays in treatment provision. By putting the individual at the heart of the process, the best possible outcome will be achieved for them. They will be able to return to the workplace sooner and thus, the employer avoids the hidden costs of absence.”
It is relatively straightforward to work out the financial benefits of this approach, he said, by using cost-benefit analyses to weigh up the costs spent on early intervention and treatment versus the time, productivity, etc. lost had nothing at all been done.
Spencer said: “If you know how much the absence of one person costs your company per day, then you can work out the total you have saved by multiplying that cost by the number of days you saved by helping that person return to work earlier.”
