Quarter of SMEs hit by EL claims

A quarter of SMEs have had workplace injury claims filed against them by employees since 2009 according to research from Axa.

The research, amongst UK SMEs, found 24 per cent of businesses have had an employee or former employee make a claim against their employers’ liability insurance in the last five years.

Firms were also concerned about the potential for fraudulent claims activity, with 84 per cent believing the UK has a compensation culture in the employer liability area and 77 per cent seeing claims management companies (CMCs) as the principal contributors to this trend, with 80 per cent say that CMCs’ marketing activities should be curtailed by limiting or controlling the volume of cold calling, an idea first mooted by Lord Young in 2010.

Fears over fraudulent EL claims mean 79 per cent of SME owners want to see tougher medical examinations imposed for workplace related accident or injury claims.

Fifty per cent of respondents said they have experienced an increase in premiums over the last five years. Industry data shows that the number of firms experiencing a claim has risen sharply during this period, which has, in part, driven this rise in premiums. This is despite the fact that the number of reported workplace injuries and accidents has fallen.

The research found 84 per cent support a new requirement on claimants to go through alternative dispute resolution before pursuing a legal claim and 79 per cent support making medical examination standards tougher, which reflects the concerns, linked to whiplash claims, already being explored under the Ministry of Justice’s proposals on independent medical panels.

Axa managing director, underwriting David Williams says: “It is clear from this research that workplace injuries remain a major issue for SMEs – the lifeblood of the British economy. The cost of fraudulent workplace claims is bringing about the inevitable consequence of higher Employers’ Liability premiums. Small business owners have serious concerns and would like to see the Government go even further with its reforms. There is a case to be made for introducing more vigorous medical examination standards around workplace injury claims in order to combat the growing compensation culture along with an overhaul of the dispute resolution track. In any case, our research shows that as the prevalence of claims increases, it poses a higher risk to the stability of SMEs and companies need to make sure that they are adequately protected against them.

“One thing we are calling for is the insurance industry to draft a code of conduct on best practice for health and safety for businesses and the voluntary sector. This should include separate guidance focusing on risks specific to small and medium-sized businesses and would go a long way to helping businesses ensure that they are fully informed on the risks to staff and the ways to mitigate them.”

Professor Christopher Parsons of Cass Business School says: “This research suggests that there is a perception among employers of the existence of a compensation culture. It seems clear that the upward trend in employers’ liability premiums is likely to continue given the reductions over the years in Industrial Injuries Scheme benefits, which have increased the incentives to make EL claims against employers.

“Considering the increasing size of injury awards, which have consistently outstripped both earnings and general inflation, further rises in EL premiums seem likely even if accident rates continue to fall, as EL claims are more attractive to injured workers and are easier to make.”