Manufacturers have have written to the Competition and Markets Minister, Melanie Johnson MP, urging a referral to the Office of Fair Trading over the failure in the market for compulsory employers liability insurance which is driving premium rises of up to 400%.
The Engineering Employers Federation (EEF), which represents 6000 UK manufacturing and engineering firms, has consulted members on the stability of the EL market.
Its research has shown that because insurers do not share information on claims experience, firms looking for alternatives will find only higher costs, as new providers load premiums for unknown risk.
The EEF has also found further market restrictions, with evidence that insurance companies are refusing to sell EL other than as part of a broader package of insurance.
For some parts of manufacturing, companies are finding real difficulty obtaining ELI cover at any price. Whilst employers are required by law to obtain ELI, there is no responsibility on insurance companies to provide cover.
Martin Temple, Director General of the EEF said:
"The market for compulsory ELI appears to be failing and we believe the issue warrants OFT referral. There are clearly many factors, which have led to the apparent collapse of the compulsory insurance market, but its effect on manufacturing is causing major problems for a sector already facing serious trading conditions. While other sectors may be able to pass on their costs to customers, this is not an option for many small and medium manufacturing companies."
Ahead of the Chancellor's Pre Budget Statement, the EEF is also calling for a cross-departmental review of the impact of government policy on the market for business insurance.
The EEF believes that government policies fail to join-up across departments - a recent Department of Health consultation sought to extend the recovery of NHS treatment charges in personal injury cases, a move which could add further costs of the order of £100 million plus into the UK's liability system - this while government has yet to act on its own recommendation of the need to reform employers liability insurance, expressed in its "Revitalising Health and Safety" strategy, published in June 2000.
The EEF also believes it is inappropriate for Treasury to bank windfall gains from Insurance Premium Tax at a time when rising premiums threaten company survival, and at a time when the market is showing such signs of weakness. The windfall should be used to fund health and safety programmes amongst small and medium firms, and those in higher risk sectors, or to provide a reinsurance fund to cover remote risk related to ill-health.
The EEF is shortly to publish a wide ranging discussion paper, addressing the need for fundamental reform of the UK's employers liability insurance and worker compensation system, and outlining a range of options for change.
Martin Temple said:
"Our concerns are not confined only to the impact on business. The Insurance industry is facing massive challenges in taking on risks which are increasingly more difficult to define. What is needed is a complete review of policy in the area of employers liability insurance and worker compensation, and we urge Ministers in the strongest terms to work with business and the insurance sector towards new solutions that work."
