The move is part of a campaign by the Department for Work and
Pensions to reduce the administrative burden on businesses by 25%.
The DWP estimates the total cost to UK business of meeting current
requirements to retain and display the certificates at £71
million.
Since 1972, employers have been required to insure against
liability for injury or disease to their employees arising out of
their employment. Failure to do so carries a penalty of up to
£2,500 for every day without appropriate cover.
Under the Employers' Liability (Compulsory Insurance)
Regulations 1998, employers must retain each employers' liability
certificate for 40 years, although there is no penalty for
non-compliance.
In addition, one or more copies of the current certificate must
be displayed at each place of business and be "reasonably
protected" from being defaced or damaged. Accordingly, most
organisations frame copies of their certificates and hang them in
staff kitchens or other communal areas. There is a penalty of up to
£1,000 for failure to display and provide a copy of a certificate
to an inspector on request.
Businesses with multiple sites have identified this requirement
as a considerable burden. BT, for instance, has to display
certificates in about 2,500 buildings throughout the UK.
Last year the DWP launched a consultation reviewing the
regulations and the Government has now published its response,
taking into account comments received from claimant and industry
representatives, the Association of British Insurers and
others.
Retention
The Government proposes to remove the specific requirement for
retention of employers' liability certificates altogether and rely
instead on the principle of business 'best practice' to encourage
businesses to keep proper records, backed up by amended guidance
from the Health and Safety Executive.
One of the recurring problems in 'long-tail' industrial diseases
claims (where the illness may not become apparent or be diagnosed
for many years) is tracing old policies that either pre-date the
introduction of compulsory employers' liability insurance cover or
the regulation requiring employers to retain insurance
certificates. Additional difficulties are caused where companies
have ceased to trade.
But the Government does not believe there is an effective
regulatory solution to these problems and has rejected calls for a
national database of all employers' liability policies as
prohibitively expensive.
In 1999, the ABI, which represents 95% of all employers'
liability providers, introduced a tracing system as a last resort
for finding old polices. Its current Tracing Code of Practice
includes a commitment from insurers to keep employers' liability
records for 60 years.
The ABI has expressed concern that the proposal to remove the
retention requirement will result in greater reliance on the Code,
at additional cost that is likely to be passed on to
policyholders.
The Government, though, points out in its response that it is in
employers' best interests to retain insurance information. It
argues that if no insurance records can be found, it is the
employer who is left to pay the claim. "Strongly worded guidance
will ensure that business is aware of its continuing liability and
encourage the retention of records to ensure that any future claim
can be met," it said.
Display
The Government has confirmed its intention to amend the display
requirement to allow the insurance certificate to be displayed
electronically, should businesses choose to do so. The requirement
to protect certificates from damage would be removed, saving
businesses some additional compliance costs.
This has the added benefit of making the information more easily
accessible to home workers. For smaller businesses, however,
posting a hard copy of the certificate on a notice board may remain
the most cost effective option and the amended regulation will
continue to allow them to do so.
Want more content like this? This story was written by the insurance and reinsurance legal experts at Pinsent Masons, the law firm behind OUT-LAW.COM. We've recently launched a new section, legal info for Insurance and Reinsurance, giving free legal information to anyone working in that sector.
