Group personal accident cover is often overlooked but, as Colin Toppin explains, early case management of claims can be an effective way of reducing employers' claims costs
Employers' liability claims currently take an average of 1000 days to reach full settlement, with nearly 40p in every pound representing legal costs. Furthermore, in January next year the NHS recoveries scheme will expand beyond its current scope to include all cases where personal injury compensation is paid to an injured person. The amendment to the scheme is expected to result in a 150% increase in insurers' bills - an extra £150m a year.
Yet despite this, EL rates have not hardened. With this backdrop of upward pressure on compensation costs and with personal injury claims inflation running at around 9%, is there not a better way?
It may seem like a long time since the EL market experienced difficulties between 2001 and 2003 but there are several factors that will undoubtedly lead to renewed pressure on EL rates. While the principle objective of the UK's EL system is to compensate those who are harmed through the negligence of employers, it is viewed all too frequently in terms of financial compensation. As such, employees who have suffered need to be fairly compensated but a far greater emphasis is needed on minimising the extent and adverse effects of injuries and, ultimately, getting people back to work.
Time and costs
Under the current system, a significant amount of time and costs are involved in establishing whether there has been negligence and this means that the immediate needs of an injured person are sometimes sidelined. In addition, the ability of group personal accident cover to make an impact soon after an accident is often overlooked; a difference can often be made in terms of potential rehabilitation, relationships between employers and injured employees and speeding up the settlement process.
Personal accident policies offer non-fault payment in the event of accidental bodily injury and, unlike EL or public liability, have no link to negligence. Early case management of liability claims is known to be cost effective and a personal accident claim can serve as a warning signal.
This enables far earlier investigations and more accurate reserving of any liability incident but, more importantly, GPA cover can act as a vehicle for payment of fair and swift compensation to an injured person, without debate over negligence, quantum, or legal fees.
It is at this stage in the process that the real benefits of GPA cover are felt. With the payment of a sum of money at such an early stage in the proceedings, employers can then exercise discretion in how that money is best put to use.
Through passing some or all of the claim payment to an injured person early in the process, an employer is able to demonstrate a swift and positive attitude and can be seen as acting for the benefit of the employee.
While this is not removing the right of access to justice through statutory compensation, it may serve to build better relations between employers and employees as a result of the early dialogue. This can help reduce the adversarial contact that can contribute to a build-up of frictional claims costs further down the line. News of early intervention by employers also tends to have a positive impact on the wider workforce.
Some of the frictional issues that can build up between employees and employers may be avoided by foresight in carrying GPA insurance. In the event that a liability claim is intimated after a GPA claim has been paid to the injured employee, there is no debate about over-compensating the injured employee - the foresight and premium spent on GPA has been money wisely invested by the employer.
Under the May 2004 ruling in Gaca v Pirelli, the defendant company set up a non-contributory GPA insurance from which the claimant received substantial compensation following an accident.
The claimant, relying on previous case law, argued that the claim payment should not be taken into account in the calculation for overall damages and those should be treated as benevolence payments. The Court of Appeal rejected these arguments.
The claimant continued to press that the insurance exception should apply and that his endeavours for the employer were akin to making premium contributions towards the GPA policy. The court again rejected this stating that for the insurance exception to apply, literal financial premium payments must have been made by the employee.
Therefore, if the insurance industry is looking to influence care and compensation issues and seeking to do what is in the best interests of all involved, it must look hard at how it compensates claimants. Early case management stands a better chance of minimising the extent and adverse effects of injuries and getting employees back to work, which is surely the real aim of the EL system.
- Colin Toppin is accident and health manager at Allianz Cornhill.
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