The ‘R’ Word kKeeping it legal

These really are extraordinary times. The events of the past few weeks have been viewed with a mixture of shock and surprise as, one after another, a series of household names have been caught up in the ever widening fallout from the credit crunch. The insurance industry has not escaped the effects of the global financial crisis and on both sides of the Atlantic. After a long absence, the “R” word is back on everybody’s lips. Recession, it seems, is no longer a possibility but a probability – it’s not if, but when.

Of course it’s not only the biggest companies that are affected. While their fate may grab the attention of the media headlines, the reality is that no business is immune. So, as an industry which has traditionally been at the forefront of protecting the assets and interests of companies, what can insurers now do to steer policyholders through these troubled waters?

There is an opportunity on every level for the insurance industry to prove its worth by providing help and advice to beleaguered policyholders. Less convincing is the recognition given by the insurance industry to the role that legal expenses can play as a solution.

It has often been the case that when money is tight the first part of a policyholder’s insurance portfolio to get the chop is their legal expenses. If policyholders and their professional advisers see legal expenses as nothing more than a cheap add-on then perhaps that view should not come as a surprise. After all, how much value can there be in a policy costing less than £50? But for those advisers who have taken the time to understand the product and fit it properly into their clients’ portfolio, now is the time when the true value of the product, and their own professional advice, will be appreciated.

In employment matters another R word is also back, and is already evident. Allianz’s Lawphone helpline has seen an unprecedented increase in the number of employment-related calls over the last few months. Not surprisingly redundancy is top of the agenda.

Redundancies are an inevitable consequence of any economic downturn and, while it is to be hoped that any future recession will not be as hard hitting as those of the 1980s and 1990s, the fact remains that many businesses will need to make cut backs in their workforces.

However, one of the major problems as far as redundancies are concerned is the lack of knowledge and experience among employers. This may be because a sustained period of strong economic growth has meant few employers have had to address cutbacks. For those businesses approaching the reality of redundancies for the first time there are numerous pitfalls and challenges to be aware of. The need to be fully aware of correct procedure is more significant than ever as employees are better informed of their legal rights.

Allianz Legal Protection policyholders can obtain unlimited access to professional advice on employment issues and there is no doubt that, for many, this is an increasingly essential service. It is crucial that businesses handle any employment matters correctly and follow the proper procedures, or risk facing claims for unfair dismissal, which are both costly and time-consuming.

“If an employer fails to follow proper procedure, redundancies will be classified as unfair.

Peter Dobie

One of the most striking differences between the current economic climate and the recessions of the 1980s and 1990s is the availability of help and advice for employees.

The internet has transformed access to information for everyone in so many different ways. A disgruntled employee can research proposed changes to their working environment at the click of a mouse and may even be able to issue proceedings online.

Add to that the developments in employment law over the last decade, which have provided significant enhancement to the rights of employees in relation to dismissal, and it is easy to see how employers can get it wrong.

The key word for employers is “procedure”. In simple terms, if an employer fails to follow proper procedure when making redundancies then those redundancies will be automatically classified as unfair. Even if the commercial reasons for the redundancy are clear and sound an employer can still face significant compensation claims if procedures are not properly followed.

While you might expect smaller businesses to be less well informed than their larger counterparts, this is not always the case. SMEs are not necessarily less aware. Where they do tend to suffer, however, is they rarely have the luxury of a dedicated HR team. Consequently, smaller companies can find it difficult to balance managing their business through an economic crisis with administering the proper procedures demanded by employment law. This is where access to specialist advisers, such as Allianz Lawphone, and employment law solicitors appointed by their legal expenses insurer can be of real benefit.

Of course the whole ethos of employment law is that redundancy should be the last option and legal expenses can play an important role in putting key risk management measures in place to avoid any problems in the first place. By working closely with customers and employees, employers can make effective use of workforce planning and flexible working as a way to minimise the impact of an economic downturn on workforce headcount. Allianz Legal Protection works with a key partner to provide policyholders with the opportunity to explore alternative options to redundancy should the worst happen to its business. Those businesses can not only avoid the cost and inconvenience of an employment dispute but are also better placed to trade forward and retain core expertise in the workforce.

The R word may well become an increasing fact of business life in the coming months, but there is also an opportunity for the insurance industry to help. Legal expenses should command an important place in the portfolio of all businesses, large or small. IT

Peter Dobie is underwriting manager at Allianz Legal Protection.