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Insurance Companies Can Influence Company Health and Safety
Introduction
Traditionally, all responsibility for health and safety in the workplace has been the sole responsibility of management. Even though in modern times they will be forced to introduce and comply with a great deal of legislation, it is still up to managers to actually put it into place and ensure that it is complied with. Nowadays, insurance companies are increasingly becoming active at influencing the health and safety policies of the company to which they provide insurance.
Why is Business Insurance Needed?
Similar to individuals and private households, businesses rely upon insurance to cover them in the event of an incident which would otherwise cause significant financial loss to them if they had to repair or replace items. This could come from a whole host of risks such as fire damage, flooding, explosions etc. Businesses have an additional level of insurance in the form of liability insurance which covers them in the event of them being sued as a result of an action or inaction on their part which caused damage to a person's health or property.
The Danger of Not Having Business Insurance
The potential risk of not having business insurance is obvious. Without insurance in place, any accident or situation which necessitates the company having to pay out a large amount of money could seriously jeopardise the future of the business, potentially forcing it to cease trading.
Some managers and directors of a company may think of insurance premiums as an added expense. Even worse, they may see them as a waste of money if they do not make an insurance claim, and so think about cutting them out of an already stretched budget.
Whilst all insurance costs are slightly strange insofar as you hope that you are paying money into something that you will never need, the fact is that cover is there to protect your business in the event that it will be forced to pay out a large sum of money as a result of a circumstance which is covered by the insurance. Even if you do end up paying more in premiums than you ever get out of it, the cover is there as a protection to avoid financial disaster.
Having Insurance on Place Does Not Affect Management’s Health and Safety Responsibilities
Although insurance is there to cover you in the event of a health and safety related claim against your firm, it does not in any way lessen your responsibilities for providing a safe place of work and reducing potential risks. Not only is there a legal responsibility with regards to health and safety in a place of work, meaning that criminal charges could be brought in addition to any civil financial case, but negligence or a failure to do or not do certain actions may in fact invalidate the insurance completely.
So even with a comprehensive level of business insurance cover in place, company managers still have to comply with their many duties and obligations with regards to workplace health and safety.
Why do Insurance Companies Care About Health and Safety?
The amounts of money involved for corporate insurance claims are often far higher than they are for private individuals. Insurance companies will feel a greater financial impact when they have to pay out for a large corporate claim. As such, they will want to have more of an idea about what goes on within the company and, more pertinently, what measures and controls are in place to minimise the chances of an incident taking place which would result in an insurance claim.
The extent to which insurance companies are concerned with potential payouts has resulted in an increase in the level of scrutiny and influence which they have over the company to which they are insuring. If they are going to cover them for such large amounts, they want to know what the company is doing to reduce the chances of such an incident occurring. They may even demand certain conditions be met and particular control measures be put in place as a prerequisite of them providing the requested level of insurance cover to the organisation.
It is also likely that the insurance company will require a certain level of understanding about what the company does, how it goes about it, the risks involved and what it does to minimise such risks when it decides upon the level of premium to charge for providing the insurance. Because circumstances change, the insurance company will often want to conduct periodic reviews to ensure that risks are still being managed appropriately to determine that the premium being charged is high enough. It may also be the case that the company can introduce such comprehensive controls, safety features and level of health and safety training that it actually warrants a lower insurance premium than currently being charged.
How a Change to the Workplace Could Cause Premiums to Increase
Insurance companies will typically determine premium levels that need to be paid by the company based on a number of factors. Not only will the amount of cover be a significant determining factor, but there will also be a number of others, including but not limited to:
- The type of industry
- The countries or jurisdictions of operation
- Number of employees
- The equipment used
- Existing levels of health and safety controls and staff training
Of course, all of those things can change quite quickly (with perhaps the exception of the type of industry, but even this is not unheard of). The world of business is dynamic and ever-changing, which means that factors that the insurance provider used to work out appropriate premiums may now be materially different.
It may not be an issue, or it could be so much of an issue that it invalidates the insurance. For clarity and to ensure that you have the insurance cover that you expect and may depend upon at some point in the future, it is imperative that regular communication takes place with our insurers. Preferably, this should take place before major alterations are made.
Satisfying Insurance Criteria Could Lead to Other Benefits
Aside from simply complying with legislation and ensuring you meet the terms and conditions associated with your insurance policy, proactively taking steps to satisfy any insurance health and safety criteria can also have other benefits for your organisation.
For one, a company which is seen to be proactively taking steps to create a safe place of work with a positive health and safety culture in place will often be viewed more favourably by employees. Not only will motivation and productivity pick up, but staff turnover should also decrease as fewer employees have a strong desire to leave the company.
As mentioned earlier, if changes are made which lower the probability of accidents and injuries occurring, insurance premiums may in fact go down, and which over a fairly short period of time will more than offset the cost of the additional safety features or health and safety training provided to staff members.
Improved health and safety within the workplace will also reduce the occurrence of relatively minor accidents. Whilst these may not have resulted in any compensation claims or need to claim on the company insurance, having employees sat at home or unable to work at full speed would still have caused unwanted productivity headaches for the company. By keeping workers healthy and happy, the company will have a greater number of its workers actually at work, and operating at 100%.
