CLAIMSadvisor ENGINEERING & MANUFACTURING SUPPLEMMENT SEPTEMBER 2013 Managing Employers’ Liability Risk How to reduce the total cost of claims The failure to guard against Employers’ Liability (EL) claims and have appropriate insurance and protection in place can be extremely costly to an engineering and manufacturing company. This bulletin looks at new regulations and how companies should be building their defence against rising EL costs. According to HSE statistics there were over 638,000 injuries in the workplace in 2010 and 2011; half a million people were off work due to illness and there was a fatality every two days. Compensation for EL claims totalled over £1bn, with an average settlement of £10,000, while sick pay added another £1bn to the bill. Meanwhile, EL claims are on the increase again after temporarily dropping off between 2008 and 2010. Amidst a challenging economic climate, the manufacturing sector accounted for 10% of that total, so for hard pressed businesses in the UK it has never been more important to avoid becoming another statistic. Those responsible for risk management within the UK’s manufacturing firms must now contend with the issues that spark attritional claims as well as a number of emerging trends. These include the everyday concerns - absence management, maintaining a safe workplace, reducing accidents - to potentially seismic changes in governing regimes or legislation such as the deregulation of health and safety. What is Root Cause analysis? Companies are increasingly trying to understand their organisation from a cultural perspective; asking some difficult questions in the process. The process of root cause analysis can help give you focus and improve in those areas, which will save you a lot of money in claims. Employees within manufacturing industries remain well represented by trade unions so it is important to engage them and your workforce to try and address EL claims issues. Without that cooperation the situation may struggle to improve. “Root cause analysis can help give you focus and improve in those areas, which will save you a lot of money in claims…” Building your defences One of the keys to tackling and defending claims is through understanding your claims experience in a systematic way and on a regular basis. Where are your claims happening? What caused them? Are you managing to defend them already? If so; why? If you are settling claims, what are the reasons and are your systems holding up? At the heart of any defence is the support of clear and contemporaneous evidence. The importance of timely and accurate reporting cannot be underestimated. An injury must be assessed in a detailed and proportionate measure to the incident. With everyday accidents this might mean a brief accident book entry. At the opposite end of the scale, a severe limb injury will necessitate a 20-page report and triage process. Detailed accident reporting documentation has to be fit for purpose. This could be one of the most important documents when it comes to defending claims. evidence can provide indisputable proof. Companies should ensure they have adequate resources to investigate accidents. CCTV evidence is becoming more and more important. It may be there for security purposes but it may capture a lot of accidents too. The question is what are your retention strategies on CCTV evidence? Do you keep it for a day, a week, did it capture an accident; do you analyse it? This sort of evidence is incontrovertible. For companies looking for a guide on what types of evidence will work in their favour, you should look no further than disclosure lists from solicitors. These are standard documents and they outline all the things you will need to defend a claim, helping you make sure all information goes into an accident investigation report. Maintaining the courtroom theme, accident reporting also has to include the identification of key witnesses. Most people think the key witnesses are only the people who actually saw the incident, suggesting that if you didn’t see it then you’re not a viable witness. In fact key witnesses could very well be people who did not see the accident, but if their evidence is credible and relevant; their testimony is important. The injured party is also a key witness. Indisputable Evidence Interviewing witnesses is just one aspect of investigating the accident though, on a practical level CCTV or photographic “Key witnesses could very well be people who did not see the accident, but if their evidence is credible and relevant; their testimony is important.” Training essentials Employee training programmes play a significant role in defending claims. A training programme must be fully aligned with HR processes and a training matrix to ensure staff training is appropriate to their roles, once again with records maintained so that they can stand up to scrutiny. The focus of Lord Heseltine’s report in early 2013 was to shift funding from Whitehall and send it directly to the regions. Training is very important in defending claims because if you haven’t shown your employees what to do and what you expect from them then it is very difficult to say that they’ve done something wrong. It is not enough to provide the training once; you must carry out refreshers or risk a situation three or four years down the line where a court finds your business negligent for not having done so. However, the government’s radical stance on deregulation seems to have mellowed. Westminster is considering an American model called the Voluntary Protection Plan. This is where you as an organisation can go along to the regulator and say; ‘this is how we are dealing with our risks’. Alongside its training obligations, HR departments are also obliged to manage absence, which is an area where employers commonly fail to manage the value of the claim. Ensuring a quick return to work and consideration of rehabilitation at day one of an incident can result in far cheaper settlements on an EL claim than would otherwise have been the case if an employee was allowed to stay off work indefinitely. Look beyond the horizon Detail and transparency are at the heart of a successful claims defensibility strategy and above all, manufacturers can benefit from good relationships and interactions with their claims handlers, insurers and adjusters. Good dialogue with those professionals can provide valuable insight in assessing why claims are being paid and what can be done to improve your business’ exposure to losses. Companies are also advised to learn as much as they can about emerging risks that may face their industry or business sector. We all know what we’ve got at the moment but there are new types of claims coming along, with cancer-type claims starting to emerge. For example, nano-fibre technology is being cited as potentially the next asbestos. The fibres in nanotechnology are very similar in length and we don’t really know yet whether they will lead to claims. Sometimes you need to take a backward step and think about where your future exposures might lie. Deregulation or Self-Regulation? UK companies will need to be ready to regulate their own health and safety standards as the Coalition Government responds to recommendations from Lord Heseltine. The current thinking is this could result in a world where trade associations become far more important, helping to manage their members’ Health &Safety (H&S) standards. The H&S regulator may be encouraged to take a hands-off approach, only becoming involved if tragedy strikes and concentrating its efforts where most needed. When you factor in the 35% budget cuts that the HSE faces under the current saving drives this approach makes sense. It could be that those trade associations take over that role to hold members to standards of H&S. One or two are already gearing up for this. Ultimately manufacturers could benefit from the new regime. Earned autonomy means you can’t just deregulate, you need some autonomy that has been earned that the community can trust. “Companies are also advised to learn as much as they can about emerging risks that may face their industry or business sector.” Meeting the knowledge demand JLT presented these issues at a recent Employers’ Liability Seminar in Leeds, where an audience of 50 risk managers from within the manufacturing, engineering and consultancy sectors heard from a trio of experts. Jon Fitzsimmons, Claims Consultant with JLT Specialty was joined by representatives from Zurich Insurance Company and Irwin Mitchell to provide insight into the challenges faced by businesses. New practices, regulations and legislation such as the civil justice reforms and Enterprise Bill mean risk managers have to stay well informed of developments in order to manage their exposures. Demand Different At JLT Specialty, we believe in doing things differently. Why? Because in the world of insurance broking, risk management, claims consulting and settlements, the only way we can develop solutions that really deliver is to properly understand all the different challenges you face. And we know the answer does exist, no matter how difficult the question is. Our success comes from focusing on sectors where we know we can make the greatest difference. On using insight, intelligence and imagination to provide expert advice and robust – often unique – solutions. And on building partner teams to work side-by-side with you, our network and the market to deliver responses which are carefully considered from all angles. CLAIMSadvisor And because of this, our clients trust us. They have total confidence that the vital elements of their operations are covered, enabling their businesses to be even more ambitious and surpass expectations. We know how we work makes us different. It’s quite a claim but we’re driven to deliver on it every single day. JLT Specialty. Demand different. For more information about the issues raised in this bulletin, please contact: Jon Fitzsimons Tel: +44 (0)20 7558 3240 Email: [email protected] This newsletter is published for the benefit of clients and prospective clients of JLT Specialty Limited. It is not legal advice and is intended only to highlight general issues relating to the subject matter which may be of interest and does not necessarily deal with every important topic nor cover every aspect of the topics with which it deals. If you intend to take any action or make any decision on the basis of the content of this newsletter, you should first seek specific professional advice. JLT Specialty Limited The St Botolph Building, 138 Houndsditch, London EC3A 7AW Tel +44 (0)20 7528 4000 Fax +44 (0)20 7528 4500 www.jltgroup.com Lloyd's Broker. Authorised and Regulated by the Financial Conduct Authority. A member of the Jardine Lloyd Thompson Group. 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