HC Deb 04 December 2003 vol 415 cc66-8WS
The Minister for Work (Mr. Desmond Browne)

On 3 June the Government published its First Stage Report into Employers' Liability Compulsory Insurance. In response to problems for business caused by rapid increases in premiums for this insurance, the report analysed the nature of the difficulties within the Employers' Liability Compulsory Insurance (ELCI) market, the causes and their impact on business. It identified an agenda for action committing Government to work with stakeholders to bring about improvements. Government promised to report on progress in the autumn.

I am pleased to announce the publication of the report that meets that commitment. I have arranged for copies of the report to be placed in the Library. This second and final report describes the work that has been undertaken since June, identifies the further actions we intend to take and sets these in the context of a strategic approach aimed at improving the efficiency, sustainability and outcomes of the Employers' Liability Compulsory Insurance system.

The First Stage Report contained some difficult messages: that there were no quick solutions; that premiums had been held artificially low prior to recent rises and that the current levels of premiums were reflecting the true economic costs of accidents, injuries and ill health in the workplace. However, it also recognised that the pricing behaviour within the market meant that far too many businesses, quite out of the blue, had faced acute price increases; late renewals and premiums that often have not reflected individual health and safety efforts. The market has not failed but in many instances it is simply not working well enough.

So, as the report demonstrates, the Government are acting. We have been facilitating improvements in the short term, while helping stakeholders begin to tackle the difficult long term issues. In the past six months we have worked with business, the insurance industry, lawyers and unions to build a real and constructive partnership.

Already this partnership is having beneficial results for business, particularly smaller businesses, in areas such as renewals and making underwriting more risk-based. Providing better risk information has improved Small and Medium Sized Enterprises' (SMEs') access to the EL insurance market and in some cases delivered lower premiums. Further work is aimed at encouraging better health and safety and occupational health and thus, fewer costs to firms from injury, illness and absence. Action to reduce process costs will also help keep premium increases under control, as could greater use of rehabilitation in sonic cases.

To deliver significant, sustained improvements we must tackle the underlying problems together.

Consequently, we have helped stakeholders identify ways to reduce process costs and are working with them to pilot these measures. We are working on ways to improve companies' management of health and safety and so cut both the incidence and the costs of claims. And, in the light of increasing evidence that effective and timely rehabilitation can reduce overall costs whilst delivering a better outcome for the victim, we are making a significant step-change in our approach to rehabilitation. Our safety performance in the UK is good. That is one reason why the costs of Employers' Liability Compulsory Insurance are still much lower than our international competitors. However, there is more to be done, particularly on occupational health. Absence management, incident management and follow-up can help cut both the incidence and the costs of claims. That is why Government are working with the Health and Safety Executive (HSE) and insurers to provide guidance and to help business present hard evidence on their management of health and safety to the market thereby ensuring they get value from their health and safety investment. This should help tackle the problems faced by small firms with good health and safety practices.

As we address the problems in the market and for businesses, particularly smaller businesses, it is important to remind ourselves why employers' liability compulsory insurance is important: to provide an incentive to reduce accidents at work and improve health and safety; to properly compensate employees who are injured through their employers' negligence; and to protect businesses by spreading the risk of workplace accidents which might otherwise ruin them financially.

Employers' Liability Compulsory Insurance (ELCI) has served us well for nearly thirty years. However, as risks evolve, so too must employers' liability and our response to those risks. A lot has been done since June. We are committing to do much more. But we also recognise that there is no simple, quick solution. It is not a problem that Government can take away and fix.

An effective response and sustainable improvement, requires a long term partnership. The past six months have seen such a partnership develop and start to deliver. Government are determined to play its part. This may be a final report, but it is not an end to our work.