§ 4. Mr. Alistair Carmichael (Orkney and Shetland)
What assessment her Department has made of the impact of the recent changes in the cost of employers' liability compulsory insurance cover on UK businesses. 
§ The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths)
The Department of Trade and Industry is working closely with the Department for Work and Pensions, which oversees this insurance, and with the Treasury, which oversees insurance markets.
I have encouraged the Association of British Insurers and the Federation of Small Businesses to adopt a code of good practice, ensuring 21 days' notice of renewals. We have produced guidance to help insurers better distinguish between good and bad safety management and I am pleased to see it reported that this year's rises are more modest than previously.
§ Mr. Carmichael
I am grateful to the Minister for that reply and I welcome his announcement, although the situation in my constituency, which is heavily dependent on small and medium-sized enterprises, indicates that 918 that will not be enough. Some 25 per cent. of businesses in my constituency have reported an increase of 100 per cent. or more in the cost of employers' liability compulsory insurance premiums in the past 12 months. Can meaningful regulation be introduced to ensure that the insurance industry operates in a transparent manner and does not discriminate against SMEs in that way?
§ Nigel Griffiths
I am concerned about reports that the insurance industry has been using employers' liability compulsory insurance as a loss leader, writing premiums well below underwriting losses and making subsequent adjustments. Of course, small businesses find that very difficult to cope with. The Office of Fair Trading looked at this issue in the light of factors such as competitiveness and transparency and decided not to take action at this stage. However, the DTI always keeps such matters under review.
§ Mr. Eddie McGrady (South Down)
Is the Minister aware that SMEs in Northern Ireland are suffering a double jeopardy, in that their premiums are already beyond mainland levels? Does he understand that there has been an average increase of 500 per cent. in the past three years? The premium of one of my constituents, who has a no-claim record, was £500 three years age? now, it is £8,000. Businesses in Northern Ireland cannot sustain such increases. A fact-finding study in November 2002 reported in March 2003, but no action was taken. A further study commenced last month. SMEs in Northern Ireland cannot wait any longer—they are going out of business as I speak. Will the Minister expedite his resolution of this serious problem?
§ Nigel Griffiths
I am aware of the problems in Northern Ireland, because I discussed them on my last visit to see representatives of the Federation of Small Businesses there. The hon. Member for South Down (Mr. McGrady) highlights what appear to be unacceptable escalations in premiums. We have been working with and on the Association of British Insurers to try to ensure that proper risk assessments of companies are made. I visited several small businesses that, without experiencing circumstances that might adversely affect their claims, have seen their premiums rise to unacceptable levels. I have made it clear to the insurance industry that such rises are indeed unacceptable.
§ Mr. Henry Bellingham (North-West Norfolk)
The Minister referred to the Federation of Small Businesses, but has he seen the latest "Financial Statement and Budget Report", which pointed out that 6 per cent. of its members have faced reductions in profits as a direct result of soaring insurance premiums? Furthermore, 19 per cent. are having to lay off staff, and a worrying 8 per cent. reported that they were trading without proper insurance. A year ago, the Minister said that he took that issue very seriously. We have had several reports and heard many platitudes, but when is the small firms Minister really going to listen to small firms?
§ Nigel Griffiths
I deplore any company that is trading without proper insurance, which is illegal. I advise the hon. Gentleman to supply any information on failures to hold valid insurance to the Health and Safety 919 Executive. Since the matter was raised last year and before, the latest survey, which was last month—the Bank of Scotland has commented on it—showed that, whatever the hon. Gentleman says about returns and profits, a third of small businesses intend to recruit staff and 20 per cent. are to increase net investment. That tells me that small businesses have, in their customary way, coped with great fortitude and are not being deflected from making the necessary investment to grow. That is what I want to see.
§ Mr. Martin O'Neill (Ochil)
Does my hon. Friend understand that it is not just small and medium-sized enterprises that are affected by the problem? There are several construction companies in my constituency, and in the past they prudently entered into two or three-year deals to cover insurance premiums—but when they reached the renewal date, they found that those premiums were doubling or trebling. Those companies require employers liability insurance for health and safety reasons, because the construction industry is one of the most dangerous. If they have either to cut corners or to reduce staff, it is not good for the industry as a whole. Big businesses are being hit as well as small, and who will pay for that? It will be the safety of the workers.
§ Nigel Griffiths
As the Minister responsible for construction, I know that that sector has one of the best safety records in the world, and I do not want anything to jeopardise it. I hope that my hon. Friend and the House will be pleased to learn that the DTI construction directorate has engaged an insurance industry specialist to liaise more closely with the industry to ensure that it is properly covered. The necessary steps must also be taken to ensure that building and construction sites meet the highest safety standards, which will also help to reduce their insurance premiums. I want to see them rewarded for taking such action.
§ Mr. Andrew Stunell (Hazel Grove)
May I draw the Minister's attention to a small construction company in my constituency, which, after decades of claim-free operation, has had an eightfold increase in premiums in five years? That is clearly a serious problem for companies that have taken account of the safety factors, but are still being penalised by an insurance industry that seems deaf to the claims records and the needs of small businesses.
§ Nigel Griffiths
The hon. Gentleman highlights a matter that we all find unacceptable. I am sure that he has made direct representations on behalf of his constituents to the insurance company concerned, and I am happy to add my voice as the Minister and write to the company myself.