Latest news and updates on issues affecting business. - Bluefin Group
Latest news and updates on issues affecting business. January 2017
In this issue • What is underinsurance? • Recent HSE news and prosecutions • 6 ways to reduce employers' liability claims • New report shows alarming extent of SME underinsurance • Mental health must be a priority in 2017
What is underinsurance? Underinsurance means inadequate insurance coverage by the holder of a policy. In the event of a claim, being underinsured occurs when the cost of the claim exceeds the maximum amount that will be paid out by the insurer. The likely impact depends on the size of the gap in cover and your individual circumstances but small businesses regularly don’t survive past the first year after a loss and some major corporations find the financial implications of a loss catastrophic. Make sure you avoid being underinsured by regularly updating your insurance cover to protect against new risks. The cost of being underinsured Read our example cases to get a true picture of the cost of underinsurance. Cases are based on true events, but names and businesses have been changed. Mr S at Example Motors: Fire – property undervalued. Mr S, a motor trader, experienced the real cost of underinsurance when his commercial property caught fire causing damage to the tune of £38,000. His cover included a sum insured of £400,000, however this was not based on a professional valuation, which hadn’t been undertaken for many years, if ever. The rebuilding value was costed at £675,000 and therefore with the application of average the insurance pay-out was only £22,500. Had Mr S had regular valuations, and updated his policy accordingly, he would have had the correct level of cover, and not faced a shortfall. Cost to Mr S = £15,500 Example Golf Club: Vandalism - business interruption underestimated. Example Golf Club assessed its Business Interruption sum and insured at £600,000 with a 12 month indemnity period. After a malicious attack, a number of greens needed reconstructing and reseeding. Members moved to a nearby competitor golf club, which saw the opportunity and offered very attractive 2/3 year membership deals. The client was able to claim for loss of revenue for 12 months following the attack, but the effect to the business stretched for 2 years and beyond. Example Golf Club had seriously underestimated the length of time of their indemnity period. If only they had spoken to insurance specialists and truly assessed the length of time to recover, BI could have been arranged for 24 months or more. Cost to Example Golf Club: potentially £100s of £1000s.
6 ways to reduce employers’ liability claims In 2015-2016, nearly 700,000 workers suffered an injury whilst at work, which contributed to 30.4 million lost working days and cost the economy about £14.1 billion, according to the HSE. Because your organisation is required to have employers’ liability cover, you already have cover to help pay compensation if your employees suffer a work-related injury or illness. However, there are a number of hidden costs that are not covered by insurance, such as lost production, recruitment and training expenses, and any necessary overtime pay. To help rein in any hidden costs, consider adopting the following strategies: 1. 2.
3.
4.
5.
6.
Conduct routine risk assessments. One should be conducted for each piece of machinery and required task. Provide your employees with regular training. Employees should receive annual health and safety training as well as training specific to their job requirements. Manage your organisation’s occupational health programme(s). Keep track of your employees’ well-being to help identify current work processes that could be causing physical strain—allowing you to correct the processes before injuries occur. Provide adequate and well-maintained personal protective equipment (PPE). Based upon the results of your risk assessment, provide your employees with enough PPE to safely do their jobs. This equipment should be inspected at least annually to ensure its effectiveness. Develop a thorough claims investigation process. To ensure that you understand what happened and how to prevent it from happening again, interview everyone involved and take photographs. Keep thorough documentation. Keep detailed notes to help shape future risk prevention strategies.
Recent HSE news and prosecutions Heinz beans ‘can song’ advert banned over injury fears The Advertising Standards Authority has banned the Heinz baked beans ‘can song’ TV advert because it ‘encouraged behaviour that prejudiced health and safety’ and could result in young viewers injuring themselves on sharp empty tins. In its response, the HSE stated that there is no health and safety legislation that directly applies to the case and hopes that the public realises that there are no regulations preventing children from playing with empty sealed tin cans. Volvo sentenced for worker fall The national truck, bus and plant division of Volvo was fined £900,000 and ordered to pay costs of £5,820.28, along with a £150 victim surcharge, after a worker fell and suffered severe head injuries. Whilst he was servicing a delivery truck from a step ladder, the worker fell and struck his head. In its investigation, the HSE found that the step ladder was damaged, its anti-slip feet were worn and it had not been inspected. Man killed and another seriously injured by cows A Bradford on Avon farmer has been given a 12-month prison sentence suspended for two years and was ordered to pay £30,000 after two members of the public were attacked and injured, one fatally, by cows in a field. The two men were walking their dogs along a public footpath that went through a field where cows with calves were grazing. The cows may have viewed the group as a threat and charged them. In its investigation, the HSE found that the farmer had not taken reasonable precautions to protect members of the public walking along the footpaths near his cows.
New report shows alarming extent of SME underinsurance New research highlights the alarming extent of SME underinsurance and the serious disconnect between SMEs’ understanding of emerging risks and the actions they are taking to protect themselves. The problem is not that SMEs deny the threat posed by emerging risks - it’s that they neglect to update their insurance cover to protect against the reality of emerging risks. According to recent industry research, 73 percent of SMEs recognise that there are new potential risks to their business that were not present when they first opened, yet 82 percent of them have not altered or increased their insurance cover to defend against these risks. What’s worse, only 14 percent of SMEs plan to increase their amount of cover in the next 12 months. The fact that 28 percent of SMEs say they would go out of business if faced with an unexpected bill of £50,000 helps illustrate the disconnect between understanding and action. According to PricewaterhouseCoopers, the average cost of a small business’ cyber security breach is £75,000 - £310,000 well above the £50,000 that would put more than one-quarter of SMEs out of business. It is important to understand and acknowlede the reality of the threats facing your business, but it is all for naught if you fail to actually take action to protect against those threats.
Mental health must be a priority in 2017 The biennial survey from the Trades Union Congress revealed that 70 percent of companies have cited stress as the most significant hazard affecting their employees, making it the leading workplace health and safety concern. Stress has most likely earned this distinction because it can exacerbate mental health issues such as anxiety and depression. In fact, two-thirds of employees have experienced symptoms of poor mental health as a result of their workplace environment, according to research published by the charity, Business in the Community (BITC). In addition, HSE research shows that workplace stress is responsible for 37 percent of all work-related ill health and 45 percent of all working days are lost due to ill health. What’s more, 94 percent of business leaders have admitted to being prejudiced against people with mental health issues in their organisations, and 49 percent of employees have stated that they would not talk to their manager(s) about a mental health issue. For that reason, your organisation should make it a priority to ensure that your employees have strong mental health, as it can help improve overall workplace health and safety. One way to accomplish this is by having your managers attend a mental health first-aid course. The course is divided into four separate sections and teaches people how to identify, understand and help a person who may be developing a mental health issue.
The content of this newsletter is of general interest and is not intended to apply to specific circumstances. It does not purport to be a comprehensive analysis of all matters relevant to its subject matter. The content should not, therefore, be regarded as constituting legal advice and not be relied upon as such. In relation to any particular problem which they may have, readers are advised to seek specific advice. Further, the law may have changed since first publication and the reader is cautioned accordingly. © 2016 Zywave, Inc. All rights reserved.
bluefingroup.co.uk Bluefin Insurance Services Limited is authorised and regulated by the Financial Conduct Authority. 1543-0117
In this issue • What is underinsurance? • Recent HSE news and prosecutions • 6 ways to reduce employers' liability claims • New report shows alarming extent of SME underinsurance • Mental health must be a priority in 2017
What is underinsurance? Underinsurance means inadequate insurance coverage by the holder of a policy. In the event of a claim, being underinsured occurs when the cost of the claim exceeds the maximum amount that will be paid out by the insurer. The likely impact depends on the size of the gap in cover and your individual circumstances but small businesses regularly don’t survive past the first year after a loss and some major corporations find the financial implications of a loss catastrophic. Make sure you avoid being underinsured by regularly updating your insurance cover to protect against new risks. The cost of being underinsured Read our example cases to get a true picture of the cost of underinsurance. Cases are based on true events, but names and businesses have been changed. Mr S at Example Motors: Fire – property undervalued. Mr S, a motor trader, experienced the real cost of underinsurance when his commercial property caught fire causing damage to the tune of £38,000. His cover included a sum insured of £400,000, however this was not based on a professional valuation, which hadn’t been undertaken for many years, if ever. The rebuilding value was costed at £675,000 and therefore with the application of average the insurance pay-out was only £22,500. Had Mr S had regular valuations, and updated his policy accordingly, he would have had the correct level of cover, and not faced a shortfall. Cost to Mr S = £15,500 Example Golf Club: Vandalism - business interruption underestimated. Example Golf Club assessed its Business Interruption sum and insured at £600,000 with a 12 month indemnity period. After a malicious attack, a number of greens needed reconstructing and reseeding. Members moved to a nearby competitor golf club, which saw the opportunity and offered very attractive 2/3 year membership deals. The client was able to claim for loss of revenue for 12 months following the attack, but the effect to the business stretched for 2 years and beyond. Example Golf Club had seriously underestimated the length of time of their indemnity period. If only they had spoken to insurance specialists and truly assessed the length of time to recover, BI could have been arranged for 24 months or more. Cost to Example Golf Club: potentially £100s of £1000s.
6 ways to reduce employers’ liability claims In 2015-2016, nearly 700,000 workers suffered an injury whilst at work, which contributed to 30.4 million lost working days and cost the economy about £14.1 billion, according to the HSE. Because your organisation is required to have employers’ liability cover, you already have cover to help pay compensation if your employees suffer a work-related injury or illness. However, there are a number of hidden costs that are not covered by insurance, such as lost production, recruitment and training expenses, and any necessary overtime pay. To help rein in any hidden costs, consider adopting the following strategies: 1. 2.
3.
4.
5.
6.
Conduct routine risk assessments. One should be conducted for each piece of machinery and required task. Provide your employees with regular training. Employees should receive annual health and safety training as well as training specific to their job requirements. Manage your organisation’s occupational health programme(s). Keep track of your employees’ well-being to help identify current work processes that could be causing physical strain—allowing you to correct the processes before injuries occur. Provide adequate and well-maintained personal protective equipment (PPE). Based upon the results of your risk assessment, provide your employees with enough PPE to safely do their jobs. This equipment should be inspected at least annually to ensure its effectiveness. Develop a thorough claims investigation process. To ensure that you understand what happened and how to prevent it from happening again, interview everyone involved and take photographs. Keep thorough documentation. Keep detailed notes to help shape future risk prevention strategies.
Recent HSE news and prosecutions Heinz beans ‘can song’ advert banned over injury fears The Advertising Standards Authority has banned the Heinz baked beans ‘can song’ TV advert because it ‘encouraged behaviour that prejudiced health and safety’ and could result in young viewers injuring themselves on sharp empty tins. In its response, the HSE stated that there is no health and safety legislation that directly applies to the case and hopes that the public realises that there are no regulations preventing children from playing with empty sealed tin cans. Volvo sentenced for worker fall The national truck, bus and plant division of Volvo was fined £900,000 and ordered to pay costs of £5,820.28, along with a £150 victim surcharge, after a worker fell and suffered severe head injuries. Whilst he was servicing a delivery truck from a step ladder, the worker fell and struck his head. In its investigation, the HSE found that the step ladder was damaged, its anti-slip feet were worn and it had not been inspected. Man killed and another seriously injured by cows A Bradford on Avon farmer has been given a 12-month prison sentence suspended for two years and was ordered to pay £30,000 after two members of the public were attacked and injured, one fatally, by cows in a field. The two men were walking their dogs along a public footpath that went through a field where cows with calves were grazing. The cows may have viewed the group as a threat and charged them. In its investigation, the HSE found that the farmer had not taken reasonable precautions to protect members of the public walking along the footpaths near his cows.
New report shows alarming extent of SME underinsurance New research highlights the alarming extent of SME underinsurance and the serious disconnect between SMEs’ understanding of emerging risks and the actions they are taking to protect themselves. The problem is not that SMEs deny the threat posed by emerging risks - it’s that they neglect to update their insurance cover to protect against the reality of emerging risks. According to recent industry research, 73 percent of SMEs recognise that there are new potential risks to their business that were not present when they first opened, yet 82 percent of them have not altered or increased their insurance cover to defend against these risks. What’s worse, only 14 percent of SMEs plan to increase their amount of cover in the next 12 months. The fact that 28 percent of SMEs say they would go out of business if faced with an unexpected bill of £50,000 helps illustrate the disconnect between understanding and action. According to PricewaterhouseCoopers, the average cost of a small business’ cyber security breach is £75,000 - £310,000 well above the £50,000 that would put more than one-quarter of SMEs out of business. It is important to understand and acknowlede the reality of the threats facing your business, but it is all for naught if you fail to actually take action to protect against those threats.
Mental health must be a priority in 2017 The biennial survey from the Trades Union Congress revealed that 70 percent of companies have cited stress as the most significant hazard affecting their employees, making it the leading workplace health and safety concern. Stress has most likely earned this distinction because it can exacerbate mental health issues such as anxiety and depression. In fact, two-thirds of employees have experienced symptoms of poor mental health as a result of their workplace environment, according to research published by the charity, Business in the Community (BITC). In addition, HSE research shows that workplace stress is responsible for 37 percent of all work-related ill health and 45 percent of all working days are lost due to ill health. What’s more, 94 percent of business leaders have admitted to being prejudiced against people with mental health issues in their organisations, and 49 percent of employees have stated that they would not talk to their manager(s) about a mental health issue. For that reason, your organisation should make it a priority to ensure that your employees have strong mental health, as it can help improve overall workplace health and safety. One way to accomplish this is by having your managers attend a mental health first-aid course. The course is divided into four separate sections and teaches people how to identify, understand and help a person who may be developing a mental health issue.
The content of this newsletter is of general interest and is not intended to apply to specific circumstances. It does not purport to be a comprehensive analysis of all matters relevant to its subject matter. The content should not, therefore, be regarded as constituting legal advice and not be relied upon as such. In relation to any particular problem which they may have, readers are advised to seek specific advice. Further, the law may have changed since first publication and the reader is cautioned accordingly. © 2016 Zywave, Inc. All rights reserved.
bluefingroup.co.uk Bluefin Insurance Services Limited is authorised and regulated by the Financial Conduct Authority. 1543-0117
