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HSEHealth & Safety

Executive

Survey of compliance with Employers’ LiabilityCompulsory Insurance (ELCI) Act 1969

Prepared by Greenstreet Berman Ltd for the Health and Safety Executive 2003

RESEARCH REPORT 188

HSEHealth & Safety

Executive

Survey of compliance with Employers’ Liability Compulsory Insurance (ELCI) Act 1969

Michael Wright, Sara Marsden, David Turner and Richard Genna

Greenstreet Berman Ltd Fulcrum House

5 Southern Court South Street

Reading Berkshire RG1 4QS

Studies completed after the increases in the cost of Employers’ Liability Insurance (ELCI) around Easter 2002 indicated that some businesses (8% cited by the Federation of Small Businesses) are trading without ELCI. However, other sources including AON, HSE, DTI, TUC, APIL and OFT failed to identify evidence of significant non-compliance. A postal survey conducted in this study during the summer of 2003 with 2,437 respondents from micro, small, medium, large and very large firms across all sectors found that only 0.9% of micro firms, 0.37% of small firms and 0.6% of large sized firms lacked ELCI. This postal survey found similar levels of difficulty in securing ELCI and concerns about the cost as previous studies.

This study also acquired data from insurers on the number of ELCI policies they had in early 2002 and 2003. Insurers representing about 80% of the ELCI market report an increase in the number of ELCI policies between 2002 and 2003. Also, neither a request in the TUC’s Risks on line bulletin nor a new APIL email survey of its 4,458 members in November 2003 found any significant evidence of claims against uninsured employers. We conclude that whilst there have been difficulties in getting ELCI and that the cost has become an issue, there is no consistent evidence of a compliance problem. Organisations say they have responded to ELCI cost pressures by trying to improve health and safety, whilst also, to lesser extents, reducing operating costs, contesting claims and switching insurers.

This report and the work it describes were funded by the Health and Safety Executive (HSE). Its contents, including any opinions and/or conclusions expressed, are those of the authors alone and do not necessarily reflect HSE policy.

HSE BOOKS

© Crown copyright 2003

First published 2003

ISBN 0 7176 2796 9

All rights reserved. No part of this publication may bereproduced, stored in a retrieval system, or transmitted inany form or by any means (electronic, mechanical,photocopying, recording or otherwise) without the priorwritten permission of the copyright owner.

Applications for reproduction should be made in writing to: Licensing Division, Her Majesty's Stationery Office, St Clements House, 2-16 Colegate, Norwich NR3 1BQ or by e-mail to [email protected]

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We would like to thank and acknowledge the contributions made by a significant number of insurers, the Association of Personal Injury Lawyers, Risk bulletin and other organisations to the completion of this study.

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CONTENTS

EXECUTIVE SUMMARY

1 INTRODUCTION................................................................................................................................1

1.1 BACKGROUND...............................................................................................................................1

1.2 SCOPE............................................................................................................................................3

2 APPROACH TO THE WORK ..........................................................................................................5

2.1 OVERVIEW OF METHOD.................................................................................................................5

2.2 CONFIDENTIAL POSTAL SURVEY ...................................................................................................5

2.2.1 Draft and piloting of questionnaire ........................................................................................5

2.2.2 Sample frame ...........................................................................................................................6

2.2.3 Sample size ..............................................................................................................................8

2.3 CHECK OF NUMBER OF POLICY HOLDERS....................................................................................10

3 RESULTS............................................................................................................................................11

3.1 OVERVIEW OF RESPONDENTS AND CHECKS ON RESPONSE BIAS............................................11

3.1.1 Number of employees ............................................................................................................11

3.1.2 Geographic distribution ........................................................................................................12

3.2 CHECKS ON RESPONSE BIAS ........................................................................................................14

3.2.1 Sector profile and respondents..............................................................................................14

3.2.2 Membership of trade associations, risk assessments and payment in cash .........................20

3.2.3 Years organisations have employed people..........................................................................23

3.2.4 Number of claims per organisation ......................................................................................24

3.2.5 Perception of workplace hazards..........................................................................................26

3.3 SELF-REPORTED COMPLIANCE LEVELS .......................................................................................28

3.3.1 2003 overall survey results ...................................................................................................28

3.3.2 ELCI compliance by sector ...................................................................................................33

3.3.3 Reasons for non-compliance .................................................................................................35

3.3.4 Features of firms without ELCI ............................................................................................36

3.3.5 Comparison with other surveys.............................................................................................37

3.4 REPORTED PROBLEMS IN GAINING ELCI ....................................................................................38

3.4.1 Renewal refusals....................................................................................................................38

3.4.2 Renewal difficulty ..................................................................................................................41


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3.5 REPORTED RESPONSE TO INCREASED COST OF ELCI..................................................................44

3.5.1 Reported responses................................................................................................................44


3.6 FREE TEXT COMMENTS................................................................................................................47

4 INSURERS’ COUNT OF ECLI POLICY HOLDERS .................................................................50

4.1 INTRODUCTION............................................................................................................................50

4.2 FINDINGS .....................................................................................................................................50

4.3 ADDITIONAL CHECKS ..................................................................................................................51

4.3.1 Association of Personal Injury Lawyers..........................................................................51

4.3.2 TUC’s On Line Risk Bulletin .............................................................................................52

5 CONCLUSIONS ................................................................................................................................53

5.1 LEVEL OF COMPLIANCE...............................................................................................................53

5.2 THE RESPONSE TO ELCI COSTS...................................................................................................53

5.3 CONCLUDING COMMENTS ...........................................................................................................53

6 REFERENCES...................................................................................................................................55

APPENDIX A: FINAL POSTAL QUESTIONNAIRE

APPENDIX B: TABULATED QUESTIONNAIRE RESULTS

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Executive Summary

Introduction

There have been a number of studies and reports completed after the significant increases in the cost of Employers’ Liability Insurance (ELCI) premium around Easter 2002 indicating that some businesses (8% cited by the Federation of Small Businesses) are trading without ELCI either because they simply cannot afford it or because they are unable to get cover. However, other sources have failed to identify evidence of significant non-compliance. For example the DWP quote the broker Aon as reporting they could secure ELCI for all of their clients. Also, the Health and Safety Executive reported 81 ‘Notices to Produce’ ELCI certificates and 9 prosecutions in 2002/2003. This two-part study aimed to gain further evidence of the level of compliance with ELCI.

It is important to note that the self-employed, crown servants and unincorporated sole proprietorships are exempt from ELCI, although they may choose to have a policy.

Method

This study has involved two main activities, namely;

• An anonymous and confidential postal questionnaire of a large semi-structured sample of organisations;

• A check of the number of ELCI policies that insurers report they had in early 2002 and 2003.

The latter activity was carried out to provide “hard” data against which to check the selfreported level of compliance. All members of the Association of British Insurers along with AIG and 22 Lloyds of London syndicates who provide ELCI were contacted. Other studies into levels of compliance were also reviewed in the light of the survey findings.

As additional checks the Association of Personal Injury Lawyers agreed to contact its 4,458 members on the 14th November and asked if they had a claim where it transpired that the employer was not insured, and a request was placed in the TUC’s On Line Risks bulletin for examples of injured / ill employees with uninsured employers.

Piloting of postal questionnaire

The main findings of the piloting of the questionnaire were that;

• Some respondents were unaware of the term “Employers’ Liability Insurance” and that it was compulsory;

• The same respondents were unaware until prompted that they actually held a copy of their ELCI policy certificate;

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• Some respondents responded that they did not have an ELCI policy but that they did have a combined “office” insurance policy that included ELCI.

In response to these findings we included a question “Do you have a combined liability insurance policy including employers’ liability, and covering a range of other risks such as public liability, buildings insurance etc?”

Postal survey results

An anonymous postal survey was carried out in summer 2003 of 18,000 micro, small, medium, and large firms across all sectors and regions of Great Britain. An analysis of the 2,437 respondents (a 13.5% response rate) found the following level of self-reported non-compliance:

• 0.92% of micro firms (1 to 10) and 0.37% of small firms (11 to 49 employees);

• 0% of medium sized firms (50 to 249);

• 0.6% of large sized firms (250+ employees) (1.01% of firms with 250 to 1,000 employees, and 0% of very large firms, over 1,000 employees).

This equates to;

• 34,821 employees in micro firms (0.9% of 3,869,000 employees);

• 12,602 employees in small firms (0.37% of 3,406,000 employees in organisations with 11 to 50 employees);

* • 65,136 employees in Large sized firms (0.6% of 10,856,000 employees) .

Thus, this equates to about 112,559 employees in total employed in firms without ELCI. This is 0.53% of the 21,018,000 employed workforce, excluding 3,677,000 central and local government employees and 2,937,000 people in organisations with no employees (i.e. sole proprietorships and partnerships comprising only self-employed owner managers).

Expressed as the number of organisations this equates to about 10,000 organisations lacking ELCI out of about 1.2million enterprises with employees in the UK (1.01m micro, 175,660 small, 29,470 medium enterprises and 8,210 large organisations).

A number of large firms reported they lacked ELCI due to being exempt, namely central government organisations.

Almost 2.5% of respondents indicated that they were either unsure whether they held ELCI or did not hold ELCI, but that they did have a combined policy including ELCI. About 85% of respondents hold combined policies that include ELCI.

* DTI Table1 from News release Ref 02/92, 28 August 2003

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Comparison with previous studies

The results of this survey are compared with previous studies below.

This survey 0.9% of micro, 0.37% of small, medium, and 0.6% large

0% of

Federation of Small Business 8% non-compliance (SMEs)

Axa 13% of SMEs (6 to 249 employees)

Davis Langdon (DTI study) zero non-compliance in construction

OFT zero non-compliance

Small Business Service ~10% non-compliance

The postal survey found similar levels of difficulty in securing ELCI and concerns about the cost as previous studies. That is, this survey found that;

• About 5% were refused policy renewal by their previous insurer, and;

• About 18% reported experiencing “greater difficulty” than before in obtaining ELCI.

The Federation of Small Business survey reported that 25% of their respondents said that ELCI was difficult or impossible to find.

Check on survey response bias

To check the possible skew in survey respondents we:

• Compared the profile of respondents with the known profile of company sizes and sectors.

• Examined membership of trades associations, payment in cash, possession of written risk assessments, and;

• Repeated a question about the perception of the risk posed by workplace hazards asked in a previous “innocuous” HSE survey about which sector they perceive themselves as operating within.

There was no evidence of any particular skew in the profile of respondents to this survey.

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Check on number of ELCI policyholders

The second part of the study involved getting ELCI insurers to report how many ELCI policies they had in early (March) 2002 and early 2003. Realising that there has not been a fall in the number of organisations in the UK over this period, (the number of VAT registered firms increased 0.4%), the number of ELCI policies should not have varied greatly between 2002 and 2003.

At the time of reporting, data from insurers representing about 80% of the ELCI market indicates that the number of ELCI policies were;

ELCI policies in force (from insurers representing ~80% of the market)

2002 2003

930,085 1,078,788

Therefore, the data provided by insurers at the time of reporting indicates that there has been an increase in the number of policies in force. Indeed, the data indicates a 16% increase in the number of ELCI policies. It can also be reported that those insurers who have been unable to provide data, judge that they have taken on a higher volume of ELCI policies not less.

There were 1,222,625 organisations with employees at the start of 2002 according to the DTI Small Business Service, excluding 3,445 central and local government organisations. Comparable data is not yet available for 2003. However, the number of VAT registered firms increased by 0.4% between 2002 and 2003 to 1,623,715. Thus, we have no data that indicates that the number of organisations requiring ELCI has changed (up or down) significantly since the start 2002. The gap between numbers of organisations and policies is simply due to the available figures for policy numbers only covering 80% of the market.

A number of insurers have indicated to the authors of this report that there is a feeling within the insurance sector that the increase in ELCI premiums during 2002 did as much to raise the profile of ELCI as it did to force people not to comply with the EL Act. Therefore, it is possible that some companies who did not (prior to 2002) have ELCI realised that there was a requirement to be covered, due to the increased awareness raised by increasing ELCI premiums. This may account for some of the increase in EL policy holders found in the current research.

It is important to note that “general” liability insurance packages use generic terms such that they give cover for ELCI for small firms if they employ people. It appears insurers do not necessarily identify which small business policy holders actually employ (say) one or two people and hence cannot state how many small firms would actually invoke the ELCI cover in their general package.

Association of Personal Injury Lawyers

19 APIL members responded by the 24th November 2003 (out of 4,458) with 27 cases, one of whom noted that they had no claims where the employers did not carry ELCI in the past 10 years. Of these one involved a member of the public (not an employee), two involved employed

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family members, two involved insolvent insurers, one was an asbestos claim where the insurer could not be traced, three involved insolvent (prior to the claim) uninsured micro firms, one overseas accident and at least two involved uninsured firms that liquidated themselves to avoid liability. The others cases for which details were provided involved micro/small firms from a wide variety of sectors.

TUC’s On Line Risk Bulletin

Greenstreet Berman posted a notice in the 8th November 2003 TUC’s On Line bulletin “Risks” which reaches non-unionised employee representatives, asking for examples of employees suffering work related injury or ill-health whilst working for employers without ELCI. No examples had been reported by the end of November 2003.

Free text comments from postal survey

Respondents were invited to offer any comment they had. About 600 respondents from our sample of 2,400 responded. These comments have been reviewed. The thrust of the main comments are that:

• Many firms feel that the framework for employers’ liability is unfair, specifically that they feel aggrieved at a perceived limited choice of insurers for a product which is compulsory to have. This led to comment about the perceived “corruption” and unfair process of employers’ liability insurance.

• SMEs feel that the cost of ELCI is beyond their control and is vulnerable to a “claims culture” and fee chasing “no-win-no-fee” solicitors.

• Insurers have become more demanding at the same time as increasing prices.

• Employees should take greater responsibility for their own behaviour.

• There is concern about the sustainability of ELCI costs, particularly if further increases occur.

• On the one hand ELCI is difficult and costly to acquire, whilst on the other hand health and safety is a challenge for SMEs.

The comments indicate that many respondents feel strongly that there is a need for major reform of employers’ liability compulsory insurance.

Conclusions

The main conclusions are:

• This confidential postal survey has found a very low level of non-compliance with ELCI, which is confirmed by data supplied by insurers and APIL;

• This study does repeat the findings that many firms have experienced greater difficulty securing ELCI (18%) and that the cost of ELCI has caused many firms to enact cost cutting measures.

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Whilst doubt can always be cast upon the validity of self-reported compliance, the data provided by insurers at the time of reporting indicates that there has not been a fall in the number of insured organisations.

However, it is also very interesting to note that the most commonly cited response to the increased cost of ELCI is “Try to improve health and safety performance” at 50% of respondents, followed by “Try to avoid recruiting people prone to injury or ill-health” (35%) and “Switch insurers” (30%). These findings are very consistent with the HSE commissioned study by Greenstreet Berman Ltd (Wright et al 2002) that sampled firms in 2001 before the 2002 cost rises. The latter study asked a sample of firms what they might do if the cost of ELCI were to rise significantly. It found that the majority would first try to improve health and safety and avoid recruiting people prone to injury /ill-health. Thus, it would appear that the prediction in Wright et al 2002 that firms would respond to an increase in their share of the cost of work place injury and ill-health by trying to improve health and safety has become apparent to a large extent.

In summary, we conclude that whilst there have been difficulties in getting ELCI and that the cost has become an issue, there is no consistent evidence of a compliance problem. Indeed, organisations have responded to ELCI cost pressures by trying to improve health and safety, whilst also, to lesser extents, reducing operating costs, contesting claims and switching insurers. The attempt of many respondents to try to avoid recruiting people prone to injury or ill-health is of concern given the terms of the Disability Discrimination Act and Employment law on discrimination.

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1 INTRODUCTION

1.1 BACKGROUND

DWP quoted studies

As noted by the DWP in their first stage review of Employers’ Liability Compulsory Insurance (ELCI), there have been a number of studies and reports that a number of businesses are trading without ELCI either because they simply cannot afford it or because they are unable to get cover. It is clear from previous studies that there has been a significant increase in the cost of ELCI (46.5% in 2002 and 31.4% in 2001 according to the DWP review) that has caused concern amongst a number of businesses, especially in certain sectors such as manufacturing, construction and specialist areas such as nurseries. However, as indicated by the review of surveys of availability of ELCI in Box 1, the DWP concluded that their “study has found it difficult to positively identify examples of total unavailability of cover” (p28). On the other hand, research into the levels of compliance with ELCI is inconclusive, as indicated by the mixed results of studies in Box 2.

The DWP concluded that whilst availability of ELCI did not appear to be a major problem and that there was insufficient evidence to suggest a significant number of businesses were ceasing to trade due to EL pressure, compliance remains high. It also noted that the sustainability of businesses position may be a concern if, as expected, premiums continue to rise.

Box 1: DWP summary of previous studies on availability of ELCI

• “Aon, the largest broking firm in the UK has reported that, to date, all of the businesses they represent have been able to secure EL insurance.

• A recent Small Business Service survey based on 1,674 SMEs placed compliance levels in excess of 90%.

• In the OFT survey of 457 predominantly small and medium sized businesses referred to earlier, companies were asked whether they had found it difficult to obtain employers’ liability cover in the last two years; only 12% said ‘yes’, and there is no suggestion that this difficulty was translated into a failure to secure cover.

• Davis Langdon Consulting carried out a survey for the DTI covering the construction sector. The companies they consulted felt that their brokers were able to present a good case to insurers and obtain cover. Indeed all companies that responded to their study were able to obtain cover.

• The TUC report that the EL claims they are assisting on behalf of members do almost universally have insurance cover.”

Quoted from DWP, Review of Employers’ Liability Compulsory Insurance. First Stage report. P28

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Box 2: DWP cited studies of compliance with ELCI

• “The Association of Personal Injury Lawyers posted a notice on its website inviting members to notify the Association of claims where the potentially responsible employer was uninsured. The website receives approximately 500 hits a week but only one member responded, stating he was aware of three such cases.

• There is circumstantial evidence cited by the National Federation of Roofing Contractors that firms are missing out on jobs, particularly in the domestic sector, through unfair competition from illegal traders without EL insurance. This is very difficult to scope accurately.

• AXA studied 700 businesses with between 6 and 249 employees and 13% admitted to being uninsured. AXA extrapolated this to suggest that 210,000 small businesses employing 1.8m people are at risk with no cover in place.

• The Small Business Service (SBS) carried out a telephone survey of 2007 businesses in the autumn of 2002. It found overall compliance levels to be 93%.”

Quoted from DWP, Review of Employers’ Liability Compulsory Insurance. First Stage report. P31

Federation of Small Businesses 2003 survey

A further study was completed by the Federation of Small Businesses in 2003. They completed an electronic survey of 28,000 members and received a total of 1243 responses, a response rate of 4.5%. 55% of their respondents employed 1 to 4 people. The FSB found:

• 25% of employers find ELCI difficult or impossible to secure;

• Small businesses in sectors such as retail and services are facing serious difficulties in securing ELCI as well as construction and manufacturing– suggesting the problem is not restricted to firms in “high risk” sectors;

• 9% of respondents have not secured ELCI cover whilst 8% (i.e. nearly all of the 9% who could not secure cover) are continuing to trade without ELCI.

They also reported that half of small businesses receive 2 weeks or less notice of renewal, or withdrawal of cover from the insurer/broker, yet the majority of the 15% of firms who need to find an alternative insurer need 3 weeks or more to find cover.

The FSB quoted a series of employers stating that they were trading without ELCI or that they had either ceased to trade or stopped certain activities, such as having a children’s play area in a pub grounds.

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British Insurance Brokers Association 2002

BIBA reported in August 2002 that “dozens have either closed down or are continuing to trade illegally and uninsured, after being unable to secure EL cover.”

Health and Safety Executive

Evidence from HSE contacts with duty holders suggests that there is a very low level of noncompliance amongst firms. HSE checks compliance with ELCI during general inspections by HSE Inspectors and through the work of its Workplace Contact Officers (WCOs), Working Time Officers (WTOs) and Compliance Officers (COs), who focus on small and medium size enterprises. During visits, inspectors, WCOs, WTOs and COs may ask to see a valid ELCI certificate. Where the certificate cannot be produced at the visit HSE will write to the employer, and if no satisfactory response is received within a reasonable time (that is 21 days under current instructions) will make a statutory request ('Notice to Produce') for its production. However, there may be circumstances where HSE considers it appropriate to issue a ‘Notice to Produce’ straight away where an employer fails to produce a valid certificate. Failure to produce a certificate will usually result in on-site enquiries and may lead to prosecution, subject to evidence, etc.

During the period 1 April 2001 to 30 September 2003 a total of 218 ‘Notices to Produce’ were issued - 78 in 2001/02, 81 in 2002/03 and 59 from 1 April to 30 September 2003. From this in 2001/2 there were 12 instances of non-compliance leading to prosecution dropping to 9 instances in 2002/3. Prior to 2001 figures for ‘Notices to Produce’ were not recorded electronically.† Whilst the exact number of visits wherein ELCI will be examined by inspectors, WCOs, WTOs and COs is unknown, they are estimated to be in the region of, at least, thousands per year, if not tens of thousands. There were 9,006 WCO contacts alone in 2002/2003. Thus, there have been only 9 prosecutions in 2002/2003 from thousands of visits.

1.2 SCOPE

The study provides:

• Information on the proportion of firms who report that they do not have a current Employers’ Liability insurance policy;

• A breakdown of self-reported compliance by sector, region and size of organisation;

• Information on the characteristics of firms that report that they do or do not have ELCI.

The responses are sub-divided by company size, sector and region. The survey addresses possession of ELCI and helps to understand which types of firms are more likely to lack ELCI.

It is important to note that this survey focuses on the possibility of employers failing to possess ELCI, and whether the recent price increases have led to a change in the level of compliance. This study did not aim to assess the extent to which employers evade employment law more generally, the extent of illegal employment practices (such as employing people who are not

† Hansard 29 October 2003, 291W

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allowed to work in the UK) or cash based evasion of tax regulations, which could also happen to entail non-compliance with ELCI. Such illegal practices are not specific to ELCI. Notwithstanding this, Greenstreet Berman posted a notice in the 8th November 2003 TUC’s On Line bulletin “Risks” which reaches non-unionised employee representatives, asking for examples of employees suffering work related injury or ill-health whilst working for employers without ELCI. No examples have been reported.

The sample size needed to be large enough to allow confidence to be placed in the results for key sectors, namely those that it is thought have difficulties with ELCI, namely;

• Construction;

• Some aspects of manufacturing;

• Organisations with specific “high” risk operations, such as nurseries, adventure centres and riding schools.

The study also provides:

• A check with insurance company data to verify whether number of policies has changed in relation to the number of organisations, and

• A review of other recently completed studies of levels of compliance with ELCI and suggests possible reasons for the differences.

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2 APPROACH TO THE WORK

2.1 OVERVIEW OF METHOD

This project entails two main tasks, namely;

• A confidential postal survey of firms regarding their possession of ELCI and response to the cost of ELCI, and;

• A check on the number of ELCI policies held by ELCI insurers in early 2002 and 2003.

The latter task aimed to check whether there has been a significant fall in the number of policyholders, as would be predicted by the results of the Axa and FSB surveys. Noting that the number of firms in the UK has not changed greatly between 2002 and 2003, Axa’s estimate that there are 210,000 non-compliant firms should be revealed by a fall in the number of ELCI policyholders.

2.2 CONFIDENTIAL POSTAL SURVEY

2.2.1 Draft and piloting of questionnaire

The draft questionnaire covered:

• Organisational profile in respect of (say) age, size, sector, region, membership of trade associations etc;

• What actions organisations have taken in response to the cost of ELCI;

• Whether firms were refused ELCI or had greater difficulty in securing ELCI;

• Possession of current ELCI cover;

• Reasons for lack of cover;

• A space for hand written comments.

After piloting, final amendments were made to the questionnaire.

The questionnaire has been designed to place the question of the possession of ELCI within a series of other questions. This step was taken to encourage respondents, by ensuring the survey was not simply seen as a test of compliance but instead allowed firms to provide feedback on a wider range of issues.

The questionnaire makes it clear that it is anonymous and confidential. Respondents were not asked to supply their contact details to ensure anonymity. This step was taken to encourage responses.

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The questionnaire was piloted by telephone in two stages. The telephone pilot was designed to check:

• Acceptability of the questionnaire completion;

• Interviewees’ comprehension of the questions;

• Acceptability of interview duration (no more than about 5 minutes);

• Whether the questionnaire addressed all the key issues;

• Readiness to answer questions;

• Any other point raised by interviewee;

• Whether the questions generated the information needed by this study, and;

• Practicality.

The questionnaire was first piloted with 3 individuals. The outcome of these interviews was reviewed and edits made to the questionnaire. The final version of the questionnaire was tested by a further set of 18 interviews some simply by phone, but most also seeing a paper copy of the questionnaire. The questionnaire remained largely unaltered after these sessions.

The main findings of the piloting of the questionnaire were that;

• Some respondents were unaware of the term “Employers’ Liability Insurance” and that it was compulsory;

• The same respondents were unaware until prompted that they actually held a copy of their ELCI policy certificate;

• Some respondents responded that they did not have an ELCI policy but that they did have a combined “office” insurance policy that included ELCI.

In response to these findings we included a question “Do you have a combined liability insurance policy including employers’ liability, and covering a range of other risks such as public liability, buildings insurance etc?”

The final version of the questionnaire is shown in Appendix A.

2.2.2 Sample frame

The rationale was to achieve a sample frame that provides a representative sample across sectors, regions and sizes of organisations. The sample was structured according to the following sub-divisions of sectors and small, medium and large firms;

• Agriculture;

• Banking, finance etc;

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• Construction;

• Manufacturing;

• Hotel & catering;

• Education;

• Health and social services;

• Retail & repairs;

• Other services (hairdressing);

• Transport;

• Telecoms;

• Utilities;

• Local authorities and regional government.

It should be noted that employers’ liability is not compulsory for some sections of government they do nonetheless secure such insurance and hence have been included in this study.

For the sample as a whole the split between small, medium and large was designed to provide a robust sample from each size category, skewed towards small firms.

Within each sector though, the actual split between small, medium and large took account of the proportion of firms in each sector that are (for example) small. For example, the vast majority of agricultural firms are small. Accordingly the agricultural sample would be predominantly small firms. In contrast, the vast majority of utilities firms are large. The sample would also be skewed to ensure that certain sectors “of concern” are robustly represented, such as construction and manufacturing.

The structure of the survey by size and sector is shown below in Table 1. Within these categories the sample was drawn randomly from England, Scotland and Wales. The actual returns are described in section 3 of this report.

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Table 1: Sample structure

SECTOR Targeted responses

Small Medium Large Total

Agriculture & forestry 751 166 0 917

Banking, finance, accounts or insurance 200 33 51 284

Construction (incl. decorators, builders, plumbers, etc)

2503 331 126 2960

Education 1002 264 20 1286

Health or social work 1502 331 200 2033

Hotels & catering 1000 166 76 1242

Local authority / regional government 501 66 50 617

Manufacturing 2503 331 401 3235

Other services (laundry, hairdressing, estate agents etc)

2403 331 51 2785

Utilities (gas, water, electricity) 0 0 150 150

Retail & repairs 1001 331 226 1558

Telecommunications (post, phone) 150 33 25 208

Transport 500 100 125 725

Total 14016 2483 1501 18000

2.2.3 Sample size

The sample size has been set to enable confidence to be placed in the response from each sector, and in the responses (when pooled) within each size of organisation and region. The sample size rationale described below has been used in previous studies such as the Evaluation of the Good Health is Good Business Campaign.

A sample size of over 2,000 respondents from organisations has been sought to achieve adequate statistical confidence in the results. The actual survey achieved 2,400 responses. As with all sample-based surveys there is a degree of statistical “error” in the results. That is, it is

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expected that there would be a difference between the responses from a complete census of all employers and the responses from this sample. The range of error associated with any one sample is linked to the sample size and the extent to which respondents provide a common response.

Table 2 provides the ranges of error for the total sample for a number of responses.

Table 2 Ranges of error (95% confidence)

Percentage of respondents giving a response Range of error (Total sample, n = 2,400)

50% 2.2%

30% or 70% 2.0%

10% or 90% 1.3%

1% or 99% <1%

So, for example, if 99% of respondents give one answer, such as they do have ELCI, this gives a range of error of ±1%, the answer thus being between 98 and 100%.

The number of questionnaires issued to each size of firm (large, medium and small) was weighted to reflect historical response rates. That is, past experience shows a 20%, 15% and 10% response rate for large, medium and small firms respectively. Thus, you need to issue twice as many questionnaires to small firms than large firms to acquire the same number of responses.

Contact sources

Contact details were acquired from Dun and Bradstreet.

In each case data was acquired on the name of the company director, usually the Managing Director, company address, company size and their industry categorisation.

Self-selection amongst interviewees was minimised by (1) re-assuring them as to the intent of the survey (i.e. that their individual firm is not under scrutiny) and (2) by keeping questions about compliance with ELCI to page 3 of the questionnaire.

All responses were entered into an excel spreadsheet. A random check on 10% of entries was made to ensure accuracy of inputting into the spreadsheet from the completed questionnaires.

V=

= = =

=

2.3 CHECK OF NUMBER OF POLICY HOLDERS

We approached the Association of British Insurers, its members and Lloyds of London to acquire a count of the total number of firms with ELCI in March 2002 and March 2003.

We also acquired data on the total number of firms in the UK (e.g. Companies House) and estimates of any change in the number of firms between March 2002 and March 2003.

The data received at the time of reporting for the two periods has been compared and conclusions reached regarding;

• Has the total number of insured firms changed between March 2002 and March 2003?

• Is the change in numbers insured any different to the change in the recorded number of firms?

The “effective” number of companies on the companies register increased by 10% between the end of 2001-2002 and 2002-2003. However, it is unknown what proportion of these companies had employees. The number of new companies incorporated in 2002-2003 was 325,900. This is about 100,000 more than were registered in each of the previous 4 years, suggesting that the 2002-2003 registrations are due to tax changes.

The number of VAT registered firms increased by only 0.3% between 2002 and 2003, from 1,619,195 to 1,623,715. This implies there was no real change in the number of firms that may employ people.

NM=

= = =

=

3 RESULTS

3.1 OVERVIEW OF RESPONDENTS AND CHECKS ON RESPONSE BIAS

3.1.1 Number of employees

Our aim was to secure at least 300 responses from each of small (micro and small), medium and large (large and very large firms). A sample of 300 provides a reasonable level of statistical confidence in the responses. As shown below we have 1,540 small firms, 560 medium and 337 large firm respondents. This allows statistical confidence to be placed in the results for each size category of respondents.

The response rates by size of organisation are:

• 11% small;

• 22.5% medium, and;

• 22.5% large.

These response rates are consistent with other HSE commissioned surveys.

The profile of respondents is shown in Figure 1.

NN=

= = =

.

=

137

560536

1004

0%

10%

20%

30%

40%

50%

200

Org

anis

atio

ns s

urve

yed

(% o

f all

repl

ies)

1-10 (micro) 11-50 (small) 51-250 251-1000 (large) 1000+ (v large) (medium)

Figure 1 Size classes of organisations surveyed, percentages of all replies, number of organisations per size class shown above column

3.1.2 Geographic distribution

All regions are represented as shown in Figure 2 and Figure 3 Due to the low level of reported non-compliance it is not meaningful to attempt to assess regional differences in compliance levels.

0

20

40

60

80

11-50 (small) 51-250 (medium) 251-1000 (large)

100

120

140

160

180

Tota

l Num

ber

1-10 (micro)

1000+ (v large)

n st st ds nds nd d st st nd

Wesa l

ondo nE e Ea Wean la

ralEngla otla aW la

Engdl dh rthh hut ScLst

Mist

MiSout

ortoer So stt NEa N

eaCen

tEa WeGr

Figure 2 Geographical distribution of each size class of organisations surveyed (totals)

NO=

= = =

=

0%

5%

10%

15%

20%

25%

30%

11-50 (small) 51-250 (medium) 251-1000 (large)

Org

anis

atio

ns s

urve

yed

(% o

f eac

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ze c

lass

) 1-10 (micro)

1000+ (v large)

nds dn st st ds d as

t es

t nd

Walesa e an n

ondo E an

ralEngla la

h W E Wla ngl otdlt M

idh h hutort ScL

stMi E

Soutorter o st Nt S

Ea Nea Wes

CentEa

Gr

Figure 3 Geographical distribution of each size class of organisations surveyed (%)

NP=

= = =

=

3.2 CHECKS ON RESPONSE BIAS

3.2.1 Sector profile and respondents

We have completed three checks on potential response bias. Firstly we have compared the response profile against the structure of UK industry. Secondly, we have compared the profile of responding organisations with data on all industry profiles. For example, are respondents skewed towards those with Trade Association membership? Thirdly we have compared the response to a question posed in a previous HSE survey with the responses to the same question in this survey.

The distribution of respondents by sector can be compared with the proportion of organisations in each sector shown in Table 3. The table presents the proportion of UK organisations made up of (say) construction firms with 50 to 249 employees, based on DTI data for 2001. It should be noted that the DTI rounding process (they present data to 2 decimal points) means that some sectors are reported to lack any firms with over 250 employees. The respondents by sector are shown in Figure 4, Figure 5 and Figure 6. The sample frame was designed to secure a disproportionate number of responses from some of the smaller sectors, particularly agriculture, which would not be represented if it was sampled in proportion to the number of agricultural organisations with employees. It may be noted that the following sectors appear to be over represented, in respect of the number of organisations in these sectors;

• Health and social work;

• Education;

• Manufacturing;

• Services.

The apparent overrepresentation of these sectors is less pronounced when assessed in terms of the level of employment in these sectors. For example, manufacturing accounts for about 18% of UK employees but only 11% of UK firms that have employees.

We have also shown the breakdown of construction respondents. They do broadly represent the structure of this sector.

The job titles of respondents shown in Figure 7 is consistent with previous surveys, namely that small firm responses come from owner-managers whilst medium and large firm respondents typically come from a manager or director.

NQ=

= = =

=

Table 3: % of all organisations in the UK with n employees (2001)

Number of employees

1 to 49 50 to 249 250+ Total

Agriculture 4.90% 0.02% 0.00% 4.92%

Mining, quarrying, energy, water 0.13% 0.01% 0.01% 0.15%

Manufacturing 9.96% 0.76% 0.20% 10.93%

Construction 10.29% 0.18% 0.00% 10.48%

Wholesale, retail and repairs 22.20% 0.38% 0.09% 22.67%

Hotels and restaurants 9.09% 0.15% 0.02% 9.26%

Transport, storage and communications 3.79% 0.12% 0.04% 3.96%

Financial intermediation 1.48% 0.06% 0.03% 1.57%

Real estate, business activities 22.65% 0.38% 0.08% 23.10%

Education 1.04% 0.04% 0.01% 1.09%

Health and social work 4.30% 0.20% 0.04% 4.54%

Other social/personal services 7.20% 0.10% 0.03% 7.33%

All 97.04% 2.40% 0.56% 100.00%

NR=

= = =

.

=

25%

232733

76

112

305

352

436

15%

sect

(%

of a

l ls )

127 137 157

189

484

o r s

ecto

r

20%

i on s

i n e

ach

10%

O rg

anis

at

5%

0%

Health

& Socia

l Man

ufacturin

g Other

Service

s Constr

uction

Retail &

Rep

airs

Agricultu

re Loca

l Authorit

y Educa

tion

Hotels & C

aterin

g Tran

sport

Bankin

g

Utilitie

s

Teleco

mmunicatio

ns

Figure 4 Percentage of all organisations surveyed (D&B categorised) in each sector. Total number sampled per sector shown above column NS=

= = =

=

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

sati o

in

eac

h se

cto r

( % a

ll s e

cto r

s)O

r g a n

i n s

o f

Health

Care

Constructi

onReta

il & W

holesale

Manufac

turing

Personal

Service

s

Profes

sional

Service

s

Educatio

n

Transp

ort Cate

ring

Agricultu

re

Busines

s-Busin

ess

Media

&Publis

hing Chari

ties

Local G

ov Rep

airs

Leisure

Hotels

Financia

l Serv

ices

Utility

Extrac

tion

Social S

ervice

s

Emergen

cyServ

ices

Teleco

ms

Centra

l Gove

rnmen

t

Figu re 5 Percentage of all organisations surveyed (self-categorised) in each sector. NT=

= = =

.

=

0%

2%

4%

6%

8%

10%

12%

14%

ga ni

sat

ns i n

vol v

ed in

sub

-sec

t (%

of c

onst

r uct

i on)

O r

i o

o r

Builder

Mainten

ance

Other

Carpen

try

Electri

cian

Ground w

orks

Plumbing

Civil e

ngineerin

g House

building

Roofing

Decorat

ion Glaz

ing Plas

tering

Scaffo

ldere

ction

Roadco

nstructi

on Dem

olition

Asbes

tos rem

oval

Fig u r e 6 Breakdown of organisational involvement in sub-sectors of construction NU=

= = =

=

Res

pond

ents

(%)

40% Owner Manager Managing Director

35% Director Company Secretary Not Stated Other

30% Accountant Administrator Bursar Clerk

25% Principal / Head teacher Chairman C.E.O. Executive Officer

20%

15%

10%

5%

0% Small (1-50) Medium (51-250) Large (251+) All

Figure 7 Titular positions of respondents to survey within organisations of each size class NV=

= = =

=

. 50%

0%

10%

20%

30%

40%

Org

anis

atio

ns s

urve

yed

(% o

f all

cons

trcu

tors

)

1-10 (micro) 11-50 (small) 51-250 251-1000 (large) 1000+ (v large) (medium)

Figure 8 Response levels of different sized organisations in construction sector

3.2.2 Membership of trade associations, risk assessments and payment in cash

Membership of trade associations, completion of written risk assessment and payment in cash were explored as a test of the representativeness of the sample as shown in Figure 9, Figure 10 and Figure 11. The proportion of firms who have written risk assessments is consistent with previous studies.

A surprisingly low proportion of construction firms report they pay some people in cash. This may reflect the point that we only survey firms with employees, excluding sole proprietorships. It may also reflect a skew, with few “cash economy” firms responding. However, such firms would officially not have any employees and hence officially not require ELCI. The highest levels of payment in cash were personal services such as hairdressing, catering, retail and leisure. This does accord with common expectation.

OM=

= = =

.

=

i l i ies

0% /

association member assessments

Figure 9 Organisat ons in each size c ass act vely engaged in specific activit

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Professional body Trade Possess written risk Some workers paid cash

Perc

enta

ge o

f org

anis

atio

ns s

urve

yed

(%) 1-10 (n=1004)

11-50 (n=536) 51-250 (n=560) 251-1000 (n=200) 1000+ (n=137)

81122 26

60131524105244384053558 197915

39 44

40 269

0%

124

102

195

10%

20%

30%

40%

50%

60%

70%

Org

anis

atio

ns th

at p

ay c

ash

(% o

f sec

tor)

ntltu

re es

on tyes ng ure rs ls

port n b es g re ov es

nes

s n es msale

ese icpai ico u ncti

ot ilinme

Caic rit

i ic Ut icl Geri atia &

P uctiuriHoes ois vrvns rvrv rv r lecu usiRe uc ha raLeat eSe ca ehol

act

ealth SeicC y SSe S ttr

over

LoTra Ex TeEd Cgrons -Bed

inuf

il &Wal ial al cia

lAso

n ssHncG M onCnc Ma ne Sogealntr sinataPer usier

ofesRe mFiCe BE Pr

Figure 10 Percentage of organisations in each sector (self-categorised) that pay some employees in cash. Total number of organisations sampled per sector shown above

sector column

ON=

= = =

=

satio

ns th

at p

ay c

ash

(% o

f sec

to r)

60%

50%

40%

30%

20%

10%

0% 2733

305137127 484436

157 76

189352

23 112

Org

ani

Health

& Social

lecommunica

tion

Other se

rvice

s

Retail &

Repair

s

Transp

ort

Agricultu

re

Manufac

turing

Hotels &

Cate

ring

Educatio

n

Local A

uthority

Constructi

on

Bankin

g

Utilitie

s

Te

Figu r e 11 Percentage of organisations in each sector (D&B categorised) that pay some employees in cash. Total number of organisations sampled per sector shown

above sector column

OO=

= = =

2000

=

3.2.3 Years organisations have employed people

It is apparent from Figure 12 and Figure 13 that most respondents have employed people for over ten years, indicating that the sample mostly comprises established organisations. One might assume that younger firms are less likely to have employees.

1750

1500

1250

1000

750

500

250

0

<1 1 2 3 4 5 6-10 >10

Num

ber o

f org

anis

atio

ns

Years of employment

1-50 (small) 51-250 (medium) 251+ (large) All

Figure 12 Frequency of length of employment by organisations in each size class

OP=

= = =

=

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

<1 1 2 3 4 5 6-10

Perc

enta

ge o

f org

anis

atio

ns (%

)

>10

Years of employment


Figure 13 Percentage frequency of length of employment by organisations in each size class

3.2.4 Number of claims per organisation

The number of claims per organisation is very low in micro and small firms, at less than 1 in every 10 firms over the past 3 years, as shown in Figure 13 and Figure 14. This question was asked to enable a comparison to be made between the profile of respondents to this and other surveys. The reported rate of claims is consistent with previous surveys.

The finding that few small firms have experienced a claim reinforces the findings from previous studies that it is difficult to rate small firms based on their claims history, and hence reinforces the need for a risk rating scheme for small firms that does not rely on claims data.

OQ=

= = =

=

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 1 2 3 4 5 6-10

Perc

enta

ge o

f cla

ims

in e

ach

orga

nisa

tion

size

cla

ss (%

) 11-20

>20

Claims in last 3yrs

1-10 (micro) 11-50 (small) 51-250 251-1000 1000+ (v All (medium) (large) large)

Figure 14 Frequency of claims shown as a percentage of respondents within each size class during the last 3 years

0 1 80% 2 3

4 5 70% 6-10 11-20

>20 60%

50%

Perc

enta

ge o

f cla

ims

in e

ach

orga

nisa

tion

size

cla

ss (%

)

40%

30%

20%

10%

100%

Claims in last 3yrs 90%

0%

Figure 15 Frequency of claims shown as a percentage of respondents within each size class during the last 3 years


OR=

= = =

=

3.2.5 Perception of workplace hazards

A question was repeated from a previous survey completed for the Health and Safety Executive as another test of the possible response bias in this study. The previous survey was on the “innocuous” topic of which sector firms perceive themselves as operating and how they rated the quality of HSE’s publications. The question asks respondents to what extent they agree “The hazards in our workplace(s) can pose a high risk”.

The opinions of the organisations in all sectors that hazards in the workplace pose a high risk show statistically similar levels in this survey and that conducted during 2002 for all responses (p>0.05 for all categories; Figure 16). Although not statistically significant, differences in survey responses in each size class of organisation do occur and are shown in Figure 17.

Unlike the overall response by all sectors, there are significant differences in the opinions of organisations in the construction sector between surveys (p<0.01 for those that agree, disagree or strongly disagree; Figure 18). The breakdown of the specific differences in survey responses in each size class are shown in Figure 19.

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Perc

enta

ge o

f ans

wer

s (%

)

2001

2003

Strongly Agree Agree Unsure Disagree Strongly Disagree

Figure 16 Difference in belief that workplace hazards pose a high risk in organisations from all sectors surveyed in 2001 and 2003 (2437 and 791 firms were surveyed in 2001

and 2003 respectively; statistically significant changes between years are shown)

OS=

= = =

=

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8% ll

mediumC

hang

e in

sur

vey

resp

onse

s fr

om 2

002

to 2

003

(%)

sma

large


Figure 17 Change in belief that workplace hazards pose a high risk for small medium and large organisations in all sectors surveyed in 2001 and 2003

0%

10%

20%

30%

40%

50%

60%

70% 2001 2003

Change

Perc

enta

ge o

f ans

wer

s (%

)

Change

Change


Figure 18 Difference in belief that workplace hazards pose a high risk in construction organisations surveyed in 2001 and 2003 (43 and 97 firms were surveyed in 2001 and

2003 respectively; statistically significant changes between years are shown)

OT=

= = =

=

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60% ll

medium large


Cha

nge

in s

urve

y re

spon

ses

from

200

2 to

200

3 (%

)

sma

Figure 19 Change in belief that workplace hazards pose a high risk in small, medium and large construction organisations surveyed in 2001 and 2003

3.3 SELF-REPORTED COMPLIANCE LEVELS

3.3.1 2003 overall survey results

The number and proportion of respondents who self-report that they do not have ELCI is shown in Table 4, Figure 20 and Figure 21. Respondents who reported that they did not have ELCI either because they were exempt (central government, ceased trading or did not have employees) are excluded from these results. Overall, 0.54% reported that they did not possess ELCI or a combined policy that includes ELCI, excluding exempt organisations. Nearly 99% of respondents reported that they had either ELCI or a combined policy that includes ELCI, with a few being unsure. Two large private firms that responded said that they lacked ELCI, without being exempt.

This equates to;

• 34,821 employees in micro firms (0.9% of 3,869,000 employees);

• 12,602 employees in small firms (0.37% of 3,406,000 employees in organisations with 11 to 50 employees);

• 65,136 employees in Large sized firms (0.6% of 10,856,000 employees).

Thus, this equates to about 112,559 employees in total employed in firms without ELCI. This is 0.53% of the 21,018,000 employed workforce, excluding 3,677,000 central and local

OU=

= = =

=

government employees and 2,937,000 people in organisations with no employees (i.e. sole proprietorships and partnerships comprising only self-employed owner managers).

It is interesting to note that 85% of respondents have a combined policy. This result confirms the importance of asking this question as well as the direct “do you have ELCI?” question, which some respondents may not understand.

Expressed as the number of organisations this equates to about 10,000 organisations lacking ELCI out of about 1.2million enterprises with employees in the UK (1.01m micro, 175,660 small, 29,470 medium enterprises and 8,210 large private and public sector organisations).

Perc

enta

ge o

f org

anis

atio

ns w

ith c

urre

nt p

olic

y (%

)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Si Unsurengle or combined Neither

997 535 557 199 135 2423

1-10 (micro) 11-50 (small) 51-250 251-1000 1000+ (v All (medium) (large) large)

Figure 20 Current employer’s liability insurance policies held by organisations in each size class (total number of organisations per size class shown above columns)

OV=

= = =

=

3.0% Neither Unsure

2.5%Pe

rcen

tage

of o

rgan

isat

ions

with

cur

rent

pol

icy

(%)

997

535

Unsure of single, unsure or no combined Combined held, unsure of single Combined held, no single

2423 2.0%

557 199 1.5%

1.0% 135

0.5%

0.0% 1-10 (micro) 11-50 (small) 51-250 251-1000 1000+ (v All

(medium) (large) large)

Figure 21 Breakdown of organisations without current employer’s liability insurance policies by size class (total number of organisations per size class shown above

columns)

PM=

= = =

=

Table 4 Current status of employers’ liability insurance policies held by organisations in each size class of organisation. Breakdown of the total number of organisations in each size class into each policy grouping is shown as both numbers of organisations (n) and percentages

(%) of the total number of organisations within each size class.

Size Class Total Single or Neither Unsure Single Combined Combined Combined Unsure of (n) combined held, held, but no single,

unsure of single insure or no single combined

(n) (n) (%) (n) (%) (n) (%) (n) (%) (n) (%) (n) (%) (n) (%) (n) (%)

1-10 (micro) 997 979 98.19 9 0.90 9 0.90 922 92.48 878 88.06 2 0.20 24 2.41 3 0.30

10-50 (small) 535 531 99.25 2 0.37 2 0.37 509 95.14 471 88.04 1 0.19 12 2.24 1 0.19

Small (1-50) 1532 1510 98.56 11 0.72 11 0.72 1431 93.41 1349 88.05 3 0.20 36 2.35 4 0.26

51-250 (medium) 557 554 99.46 0 0.00 3 0.54 539 96.77 489 87.79 1 0.18 9 1.62 2 0.36

251-1000 (large) 199 197 98.99 2 1.01 0 0.00 192 96.48 137 68.84 1 0.50 3 1.51 0 0.00

1000+ (v large) 135 135 100.00 0 0.00 0 0.00 131 97.04 87 64.44 0 0.00 1 0.74 0 0.00

Large (251+) 334 332 99.40 2 0.60 0 0.00 323 96.71 224 67.07 1 0.30 4 1.20 0 0.00

All 2423 2396 98.89 13 0.54 14 0.58 2293 94.63 2062 85.10 5 0.21 49 2.02 6 0.25

PN=

= = =

=

Perc

enta

ge o

f org

anis

atio

ns w

ith c

urre

nt p

olic

y (%

) 100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Single or combined

1532 557 334 Neither

Unsure

2423


Figure 22 Current employer’s liability insurance policies held by organisations in each size class (total number of organisations per size class shown above columns)

334

557

1532

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0% Neither

i2423

Perc

enta

ge o

f org

anis

atio

ns w

ith c

urre

nt p

olic

y (%

)

Unsure Unsure of single, unsure or no combined Combined held, unsure of single Combined held, no s ngle


Figure 23 Breakdown of organisations without current employer’s liability insurance policies by size class (total number of organisations per size class shown above

columns)

PO=

= = =

=

3.3.2 ELCI compliance by sector

Due to the low level of reported non-compliance it is difficult to identify any specific sector as having a particular non-compliance problem.

Single or combined Neither Unsure 32112744813514322722 122 132 302 188 155

Perc

enta

ge o

f sec

tor w

ith c

urre

nt p

olic

y (%

)

100% 90% 80% 70% 60% 50% 40% 30% 20% 10%

0%

yeru

sec

nosmo

ec

se s gn al no ropsnar

t gn gnitir rcoS&

h

iaepR

&lti oh

rui ti rei knaBi tii cur

acudE

lt vriluc it aC

&s

tcatU tuAl

eSrehtO

eTlri snoCt

gA unaM

f Tlt acoL

aeH

ai etleRt

oH

Figure 24 Current employer’s liability insurance policies held by organisations in each sector (total number of organisations per sector shown above columns)

PP=

= = =

=

Perc

enta

ge o

f sec

tor w

ith c

urre

nt p

olic

y (%

) 7.0% Neither Unsure

6.0% Unsure of single, unsure or no combined Combined held, unsure of single

5.0% Combined held, no single132

4.0% 32 122 27

3.0% 188 432 155112 481 3512.0%

74 302 1.0%

22 0.0%

Bankin

g

Hotels &

Cate

ring

Transp

ort

Health

& Socia

l

Local A

uthority

Retail &

Repair

s

Manufac

turing

Other Serv

ices

Educatio

n

Constructi

on

Agricultu

re

Teleco

ms

Utilitie

s

Figure 25 Breakdown of % of organisations without current employer’s liability insurance policies by sector (total number of organisations per sector shown above

columns)

PQ=

= = =

=

3.3.3 Reasons for non-compliance

The main “contentious” reasons for the few examples of self-reported non-compliance were affordability, trying to renew and belief that it is not needed.

A number of people noted that they had no employees even though the questionnaire directed that firms with no employees should not complete the questionnaire.

A small number of large central government organisations responded that they lacked ELCI but were exempt, which is correct.

Table 5 Reasons for non-compliance in organisations without current employer’s liability insurance (27 of all the organisations surveyed were in this position)

Cited motive for no current policy Number of organisations

No employees 3

Ceased trading 2

Exempt 6

Trying to renew 2

Believed not needed 4

Cannot afford 5

Forgotten to renew 0

Refused cover 2

PR=

= = =

=

3.3.4 Features of firms without ELCI

It is apparent that those firms without ELCI are more likely to pay some of their workers in cash and were refused ELCI.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

)Pe

rcen

tage

resp

onse

(%

Yes No or unsure

Member of trade Workers paid Written risk Refused Difficulty association / cash assessments insurance obtaining professional insurance

body

Figure 26 Features of organisations without current employer’s liability insurance (16 organisations answered all questions except refused insurance, answered by only 15)

PS=

= = =

=

3.3.5 Comparison with other surveys

The results of this survey are compared with previous studies below. It is clear that this survey reports far lower levels of non-compliance than the Axa, Small Business Service and FSB surveys. However, the results of this survey are very consistent with the results of DTI, OFT, TUC, APIL and HSE data.

Study / source Reported non-compliance level

This survey 0.9% of micro, 0.37% of small, 0% medium, 0.6% of large

Federation of Small Business 8% non-compliance (SMEs)

Axa 13% of SMEs (6 to 249 employees)

Davis Langdon (DTI) zero non-compliance

OFT zero non-compliance

Small Business Service <10% non-compliance

PT=

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3.4 REPORTED PROBLEMS IN GAINING ELCI

3.4.1 Renewal refusals

The survey asked:

“Did your insurer for last year refuse to renew your Employers’ Liability insurance policy this year?”

The proportion of respondents who state that their insurer refused cover is low at about 5% and does not vary greatly between sizes of firms, as per Figure 27 and Figure 28. Table 6 indicates refusal rates by sector and size of organisations. It is clear that many sectors report significant rates of refusal, including sectors such as education, local government and banking, as well as sectors commonly seen as higher risk such as utilities and agriculture.

It can be assumed that most organisations responded by switching insurers since the survey shows switching insurers occurred and that less than 1% of organisations do not have ELCI. The value of 5% of respondents refused renewal by their current insurer must be compared with the <1% who lack ELCI and the ~27% who switched insurers due to the increased cost of ELCI.

135199550529988 No Unsure

2401

Ref

used

pol

icy

rene

wal

(% o

f firm

s in

siz

e cl

ass)

Yes 100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% 1-10 (micro) 11-50 (small) 51-250 251-1000 Over 1000 (v All

(medium) (large) large)

Figure 27 Percentage of organisations in each size class refused employer’s liability insurance policy renewal (numbers of organisations per size class are shown above

columns)

PU=

= = =

=

24013341517

0%

No Unsure 550

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Ref

used

pol

icy

rene

wal

(% o

f firm

s in

siz

e cl

ass)

Yes


Figure 28 Percentage of organisations in each size class refused employer’s liability insurance policy renewal (numbers of organisations per size class are shown above

columns)

PV=

= = =

=

Table 6 The percentage (%) of organisations within each size class and work sector that have been refused employer’s liability insurance policy renewal

Sector Under 10 (micro)

Size Cl

11-50 (small)

ass of Organisation

51-250 (medium)

251-1000 (large)

1000+ (v large)

Agriculture 7.69 2.56 4.08 0.00 0.00

Banking 0.00 0.00 0.00 25.00 0.00

Construction 6.67 1.85 7.14 6.90 7.69

Education 0.00 11.76 0.60 16.67 0.00

Hotels & Catering 2.38 7.69 6.90 11.11 0.00

Health & Social 0.48 2.08 7.95 0.00 4.35

Local Authority 8.47 2.56 0.00 0.00 0.00

Manufacturing 5.29 3.60 5.00 4.00 14.29

Other Services 3.48 8.57 6.45 0.00 0.00

Retail and Repair 1.43 0.00 3.57 4.00 0.00

Telecommunications 0.00 0.00 0.00 0.00 0.00

Transport 4.17 0.00 0.00 0.00 0.00

Utilities 0.00 0.00 0.00 8.33 9.09

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3.4.2 Renewal difficulty

The survey asked:

“Have you had any difficulty, greater than before, in obtaining employers’ liability insurance for the current year?”

A large minority of respondents, about 18%, report that they have had greater difficulty than before in securing ELCI. As shown in Figure 29 and Figure 30, it is apparent that medium and large firms reported renewal difficulty more often than small or micro firms.

Table 7 indicates renewal difficulty by sector. It indicates that all sectors report greater difficulty in securing ELCI, except telecoms from which we received a small number of responses. Agriculture, construction and utilities report greater difficulty most frequently.

The free text comments suggest that these difficulties include insurers asking for more information on health and safety, having to find a new insurer and switching insurers due to cost increases.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2399

200

529 981 No Unsure

135 554

Gre

ater

diff

icul

ty re

new

ing

polic

y (%

of f

irms

in s

ize

clas

s)

Yes

1-10 (micro) 11-50 (small) 51-250 251-1000 Over 1000 (v All (medium) (large) large)

Figure 29 Percentage of organisations in each size class experiencing greater difficulty renewing employer’s liability insurance (numbers of organisations per size class are

shown above columns)

QN=

= = =

=

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

554529

981

)

No Unsure

200 G

reat

er d

iffic

ulty

rene

win

g po

licy

(% o

f firm

s in

siz

e cl

ass

Yes


Figure 30 Percentage of organisations in each size class experiencing greater difficulty renewing employer’s liability insurance (numbers of organisations per size class are

shown above columns)

QO=

= = =

=

Table 7 The percentage (%) of organisations within each size class and work sector that have experienced greater difficulty renewing employer’s liability insurance

Sector Under 10 (micro)

Size C

11-50 (small)

lass of Organisation

51-250 (medium)

251-1000 (large)

1000+ (v large)

Agriculture 13.85 10.26 32.65 66.67 0.00

Banking 0.00 20.00 0.00 25.00 40.00

Construction 24.17 38.89 47.62 31.03 30.77

Education 18.75 17.65 11.69 16.67 0.00

Hotels & Catering 9.52 3.85 20.69 22.22 16.67

Health & Social 0.97 3.47 21.59 18.18 8.70

Local Authority 15.25 15.38 13.33 11.11 26.67

Manufacturing 20.59 19.82 27.50 34.00 28.57

Other Services 4.98 12.86 19.35 25.00 44.44

Retail and Repair 2.86 23.81 17.86 24.00 25.00

Telecommunications 0.00 0.00 0.00 0.00 0.00

Transport 8.33 40.00 22.22 13.64 27.27

Utilities 0.00 0.00 75.00 41.67 27.27


The reported levels of difficulty in obtaining cover in other studies were;

• The FSB report that 25% of their respondents found it difficult or impossible to secure ELCI.

• OFT found that 12% of firms found it difficult to obtain ELCI.

These results are consistent with the 18% who had greater difficulty and 5% who reported being refused cover in this survey.

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3.5 REPORTED RESPONSE TO INCREASED COST OF ELCI

3.5.1 Reported responses

It is apparent from Figure 31 that;

• The most commonly cited response to the increased cost of ELCI is to “Try to improve health and safety”, followed by trying to avoid recruiting people prone to injury or illhealth;

• A significant proportion of organisations have enacted one or another method of cost cutting or price increase.

The options for responding to the cost of ELCI can be grouped as follows;

Response Breakdown of response % of respondents

Reduce claims /risk Improving health and safety or contesting claims or avoiding the recruitment of people prone to injury/ill-health or stop some activities

56%

Cut costs/ inflate prices to compensate

Cut jobs, or reduce salaries or reduce investment or inflate prices

30%

Switch insurers 27%

2089 20201957

1974 19191912

187519031797 4091795

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

Perc

enta

ge re

spo n

se (%

)

Yes Considered No

Cease

trad

ing

Other

Contest m

ore cla

ims

Cut jobs

Reduce

salar

ies/ b

onuses

Stop some ac

tivitie

s

Reduce

inve

stmen

t

Inflate

prices

Recru

it no ill

/ injury

prone s

taff

Impro

ve H

&S

Switch in

surer

s

Figure 31 Percentage of all organisations engaged in various actions due to increased cost of employer’s liability insurance (numbers of organisations commenting on each

action are shown above columns)

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The 2001 survey by Greenstreet Berman (HSE, 2002) asked organisations what they WOULD do IF the cost of ELCI were to increase significantly. This current survey asked respondents whether the cost of ELCI has caused their organisation to enact any of a list of actions. When comparing results it should be noted that the majority of respondents to the current 2003 survey do not report having greater difficulty in obtaining ELCI. Nonetheless, as noted in Table 8;

• The most common response in both surveys is that organisations would/have tried to improve health and safety, followed by avoiding the recruitment of people prone to injury / ill health.

• In respect of each action, the % of firms who say they have enacted each action in 2003 is less than those who said in 2001 that they would if the cost of ELCI was to rise significantly.

• The number of organisations in all sectors that try to avoid recruiting people prone to injury or ill health show the lower responses in this survey than that predicted by the survey conducted during 2001 (p<0.01; or Figure 32). This is not true for organisations in the construction sector, where an equal level of response was observed in both surveys (p>0.05).

• Far fewer organisations say that they have contested claims than anticipated in 2001.

The difference in the anticipated change in behaviour and actual change in behaviour may simply reflect the point that many firms have not experienced greater difficulty.

Table 8 The change in the percentages of all organisations that say they would (2001) vs. have (2003) engaged in four types of action due to employers’ liability insurance

costs (survey sample sizes were 566 during 2001 and 1,953 during 2003)

Sector Action Percent of organisations Outcome of statistical test (significance testing)

2001 2003

Con

stru

ctio

n A

ll

Avoid recruiting ill /injury prone staff

Improve H&S performance

Contest more compensation claims

58.66 35.28 Different (p<0.01)

90.02 50.30 Different (p<0.05)

70.69 14.65 Different (p<0.001)

Switch insurers 48.58 30.31 Different (p<0.01)

Avoid recruiting ill /injury prone staff 55.45 51.77 No difference (p>0.05)

Improve H&S performance 90.00 69.87 Different (p<0.05)

Contest more compensation claims 68.81 30.24 Different (p<0.01)

Switch insurers 48.65 42.17 No difference (p>0.05)

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80%

70%

60%

50%

40%

30%

20%

10%

0%

94 146

5661

109

166 448

443

787

2002 2003

209 Pe

rcen

tage

of o

rgan

isat

ions

(%)

1-10 (micro) 11- 50 (small) 51-250 251-1000 (large) 1000+ (v large) (medium)

Figure 32 Change in the percentage of organisations in each size class that avoid recruiting people prone to injury or ill health due to employers’ liability insurance costs (number of organisations surveyed per size class in each year shown above column,

survey sample sizes were 61 during 2001 and 117 during 2003)

The FSB also explored “conditions for renewal”. They found that;

• Many of the small businesses who had been declined cover by their then insurer, had made changes to obtain new cover, with the most popular being reducing high risk activity;

• 38% of new insurers (when firms switch insurers) take health and safety records into account versus 32% of all FSB respondents;

• 57% of respondents reported that their claims record was taken into consideration, rising to 61% of firms switching insurers.

These findings are consistent with the current 2003 survey in that they suggest firms have tried to reduce risk and insurers have increased the account taken of claims.

The FSB also reported many firms reducing investment, with only a minority passing on costs, consistent with this survey.

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3.6 FREE TEXT COMMENTS

Respondents were invited to offer any comment they had. About 600 respondents from our sample of 2,400 responded. These comments have been reviewed. The main thrust of the comments is that;

• Many firms feel that the framework for employers’ liability is unfair, specifically that they must acquire a compulsory insurance from a small number private insurers. This led to comment about the perceived “corruption” and unfair process of employers’ liability insurance.

• The cost of ELCI is beyond the control of SMEs and is vulnerable to a “claims culture” and fee chasing no win no fee solicitors.

• Insurers have become more demanding at the same time as increasing prices.

• Employees should take greater responsibility for their own behaviour.

The comments indicate that many respondents strongly feel that there is a need for major reform of employers’ liability compulsory insurance.

Some actual quotes are given below for the sake of illustration;

• “The claims culture now prevalent in the UK is understandably increasing insurance premiums but to a level that is not sustainable by many small businesses”

• “Employers’ liability insurance for window cleaners is now most difficult to find in the market place yet it is a legal requirement to trade…”

• “Reduced number of insurers providing cover in healthcare means higher premiums with less competition.” (a hospital)

• “Increased costs has resulted in less money to spend on resources for education..” (a secondary school)

• “The cost of it seems to be spiralling out of all proportion and the insurance companies are becoming very fussy on what they will insure and what they won’t insure”.

• “Insurance companies are all too willing to agree claims so as not to go to court. Therefore the insured are not getting a good deal while insurance cover is costing companies more: thinking about winding up company”

• “Prior to conditional fee arrangements (no win no fee) with trade union, the union vetted and rejected frivolous, vexatious or unfounded claims. Now the union does not filter claims. There has been a massive increase in the number of claims..”

• “As a small business it is becoming more and more difficult to make any profit as over all costs go up…”

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• “We have increased council tax to pay for it” (local government)

• “Well managed businesses such as ours with exemplary record, appear to be treated the same, as poorly managed businesses with a bad record. Where is the incentive to improve?”

Some comments were also made about the practicality of health and safety requirements.

• “….many of my window cleaners have difficulty in reading concentration yet are expected to digest complicated written risk assessment..”

These comments reflect a sense that on the one hand ELCI is difficult and costly to acquire, whilst on the other hand health and safety is a challenge for SMEs.

Finally, some respondents noted that further increases in the cost of ELCI, of the same magnitude as last year, could cause them to cease trading. A medium sized engineering firm stated that:

• “insurance for 2003/2004 increased from £31,500 in 02/03 to £72,500. An increase of similar size for 04/05 may cause the company to consider cease trading”.

These types of comments reinforce the concern about the sustainability of ELCI costs, particularly if further increases occur.

The comments have been coded and are summarised in Table 9 . The table shows the percent of comments coded as shown, the highest being the comment that the increases are unfair.

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Table 9: Coded free text comments

% of comments Coded comment

3.16% EL/EL premium increase

10.76% EL now prohibitive / unaffordable

13.29% Increase despite good claims record / made no claims

25.95% Increases are unfair

2.53% Insurance industry fault / ripping off /corrupt etc

2.53% Monopolies exist in the insurance / underwriting industries

1.90% Unreasonably short of increase in cost of premium

0.63% Unreasonably short notice of refusal to renew

7.59% Claims culture cause of price increases

4.43% Unable to find cheaper insurance

0.00% EL is only a small proportion of our costs

0.00% More resources spent on managing / contesting claims

Major revision of EL needed (including e.g. health fund for “long-tail” 0.00% claims)

1.27% Insurance company mis-categorising industry

0.63% Hard to find suitable cover

0.00% Health and safety does not improve safety (waste of time)

1.27% Accept higher premiums are inevitable

0.00% Difficulties when trying to renew

7.59% Situation out of control / Government should step in

16.46% other

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4 INSURERS’ COUNT OF ECLI POLICY HOLDERS

4.1 INTRODUCTION

As previously noted all UK insurers identified by the ABI who provide ELCI, AIG (Europe) and 22 Lloyds of London syndicates identified by London Market Association were contacted. Each insurer/syndicate was asked to state how many ELCI policies they had in effect in March 2002 and March 2003. It was stated that all data would be aggregated to protect the commercial interests of insurers.

The following points need to be noted in relation to the data supplied by insurers;

• Some insurers count policies by the financial years whilst others report by the calendar year;

• Some insurers have difficultly in giving an exact count of ELCI policies because they may or may not be subsumed within general “office” or “property” policies;

• Insurers may provide one ELCI policy to a company that covers a number of its subsidiary companies;

• Insurers who count policies by calendar years cannot give an exact count for the final quarter of the financial year.

If the AXA and FSB surveys were correct one would expect a 13% or 8% fall in the count of policies respectively.

As the “effective” number of registered companies increased by 10% between the end of 20012002 and 2002-2003 one cannot attribute any fall in the number of policyholders to a change in the number of organisations. It should be recalled that the proportion of these new companies that employ people is unknown. New companies can include sole proprietorships with no employees.

The number of VAT registered firms increased by only 0.3% between 2002 and 2003, from 1,619,195 to 1,623,715. This implies there was no significant change in the number of firms that may employ people.

4.2 FINDINGS

ELCI insurers were asked to report how many ELCI policies they had in early (march) 2002 and early 2003. Realising that there has not been a fall in the number of organisations in the UK over this period, (the number of VAT registered firms increased 0.4%), the number of ELCI policies should not have varied greatly between 2002 and 2003.

At the time of reporting, data from insurers representing about 80% of the ELCI market indicates that the number of ELCI policies were as shown in Table 10. The remaining insurers

RM=

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were unable to provide data but judged that the number of policies they had in force had increased.

Table 10: ELCI policies in force as reported by insurers (data from about 80% of the market)

ELCI policies in force (reported by insurers with a combined market coverage of about 80%)

2002 2003

930,085 1,078,788

Therefore, the data provided by insurers at the time of reporting indicates that there has been an increase in the number of policies in force. Indeed, the data indicates a 16% increase in the number of ELCI policies. It can also be reported that those insurers who were unable to provide data, judge that they have taken on a higher volume of ELCI policies not less.

There were 1,222,625 organisations with employees at the start of 2002 according to the DTI Small Business Service, excluding 3,445 central and local government organisations. (The gap between numbers of organisations and policies is simply due to the available figures for policy numbers only covering 80% of the market.) Comparable data on organisations is not yet available for 2003. However, the number of Vat registered firms increased by 0.4% between 2002 and 2003. We have no data that indicates that the number of organisations requiring ELCI has changed (up or down) significantly since the start 2002.

There is a feeling within the insurance sector that the increase in ELCI premiums during 2002 did as much to raise the profile of ELCI as it did to force people not to comply with the EL Act. Therefore, it is possible that some companies who did not (prior to 2002) have ELCI realised that there was a requirement to be covered, due to the increased awareness raised by increasing ELCI premiums. This may account for some of the increase in EL policy holders found in the current research.

It is important to note that “general” liability insurance packages use generic terms such that they give cover for ELCI for small firms if they employee people. It appears insurers do not necessarily identify which small business policy holders actually employ (say) one or two people and hence cannot state how many small firms would actually invoke the ELCI cover in their general package.

4.3 ADDITIONAL CHECKS

4.3.1 Association of Personal Injury Lawyers

19 APIL members responded by the 24th November 2003 (out of 4,458) with 27 cases, one of whom noted that they had no claims where the employers did not carry ELCI in the past 10 years. Of these one involved a member of the public (not an employee), two involved employed family members, two involved insolvent insurers, one was an asbestos claim where the insurer could not be traced, three involved insolvent (prior to the claim) uninsured micro firms, one

RN=

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overseas accident and at least two involved uninsured firms that liquidated themselves to avoid liability. The others cases for which details were provided involved micro/small firms from a wide variety of sectors.

4.3.2 TUC’s On Line Risk Bulletin

Greenstreet Berman posted a notice in the 8th November 2003 TUC’s On Line bulletin “Risks” which reaches non-unionised employee representatives, asking for examples of employees suffering work related injury or ill-health whilst working for employers without ELCI. No examples had been reported by the end of November 2003.

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5 CONCLUSIONS

5.1 LEVEL OF COMPLIANCE

If you scale up the results of this survey you would estimate that about 112,559 employees in total are employed in firms without ELCI. This is 0.53% of the 21,018,000 employed workforce, excluding 3,677,000 central and local government employees and 2,937,000 people in organisations with no employees (i.e. sole proprietorships and partnerships comprising only self-employed owner managers). Expressed as the number of organisations this equates to about 10,000 organisations lacking ELCI out of about 1.2million enterprises with employees in the UK.

Whilst doubt can always be cast upon the validity of self-reported compliance, the data provided by insurers at the time of reporting indicates that there has not been a fall in the number of insured organisations. The results from the November APIL and TUC’s on-line bulletin also support this survey’s findings.

The level of non-compliance reported here is consistent with the previous TUC, APIL, OFT, DTI and HSE findings but far lower than the levels of non-compliance cited by Axa and FSB.

5.2 THE RESPONSE TO ELCI COSTS

The most commonly cited response to the increased cost of ELCI is “Try to improve health and safety performance” at 50% of respondents, followed by “Try to avoid recruiting people prone to injury or ill-health” (35%) and “Switch insurers” (30%). These findings are very consistent with the HSE commissioned study by Greenstreet Berman Ltd (Wright et al 2002) that sampled firms in 2001 before the 2002 cost rise. The latter study asked a sample of firms what they might do if the cost of ELCI were to rise significantly. It found that the majority would first try to improve health and safety and avoid recruiting people prone to injury /ill health.

Thus, it would appear that the prediction that organisations would respond to an increase in their share of the cost of work place injury and ill-health by trying to improve health and safety has become apparent to a large extent.

5.3 CONCLUDING COMMENTS

There are a number of reasons why the current postal survey derived different compliance levels from the Axa and FSB surveys, including;

• Date of surveys - it is possible that those firms who reported trading without ELCI in earlier surveys have now secured ELCI;

• Different samples – The FSB survey was limited to FSB members whilst this survey covered a random sample of organisations from Dun and Bradstreet’s contact database;

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• Different survey methods - this survey asked whether firms had ELCI OR a combined policy. The second question may have captured a more valid answer from people who were not familiar with their insurance arrangements, especially as about 85% of respondents have combined policies.

• Simple random variation – it is always possible that different surveys derive different results for purely random sampling reasons.

It is also possible, but entirely speculative, that the surge of publicity about ELCI has raised awareness amongst firms about the compulsory nature of employers’ liability insurance and the risk of being sued by employees, prompting more firms to seek such cover. Some insurers report that many firms who in their opinion do not require ELCI by law nonetheless secure ELCI cover, including local authorities.

The Axa survey used a very different question set than this survey. Axa asked “Which ones (risks) on the list are you currently insured against?” One option was “Employees being injured at work”. Our survey asked “Do you have a current Employers’ Liability insurance policy?” and “Do you have a combined liability insurance policy including employer’s liability, and covering a range of other risks such as public liability, buildings insurance, etc.” The piloting phase of the current study demonstrated that some companies are unaware that employers’ liability is included in their combined policies and 85% of the main survey respondents have such a combined policy.

It is also technically accurate to say that ELCI does not insure you against employees being injured at work. Rather ELCI insures employers against the liabilities arising from being sued by employees for work related injuries and ill health that arises from employers’ negligence. Thus, an employer with ELCI could correctly say that they are not insured against employees being inured at work.

Also, whilst about 6% of respondents did not say that they had ELCI, once account is taken of combined policies the non-compliance rate falls to less than 1%. Thus, the difference in survey results could also be explained by the approach taken to combined insurance policies.

Finally, it should also be noted that this study only covered Employers’ Liability insurance. It did not cover public or professional liability, both of which have also been the centre of concern. Leisure organisations, sports and entertainment organisations etc use public liability to cover the risk of injuries to members of the public. It is possible, but again speculative, that organisations that responded to other studies have failed to distinguish between difficulties in gaining public/professional insurance from ELCI.

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6 REFERENCES

AXA. Business future liability and risk report. A UK study examining SME attitudes to risk management. Completed by Vanson Bourne for Axa. December 2002.

Federation of Small Businesses. Small businesses in the 2003 insurance market. Published July 2003.

Department of Work and Pensions. 2002. Review of Employers’ Liability Compulsory Insurance. First stage report.

Office of Fair Trading. Liability insurance. A Report of an OFT fact finding study. August 2003.

Michael Wright, Sara Marsden, David Collier and Carol Hopkins. 2003. Identification of industry sectors in which employers perceive their business operates. Health and Safety Executive Research Report 109.

Michael Wright and Sara Marsden. 2002. Changing business behaviour – would bearing the true cost of poor health and safety performance make a difference? Health and Safety Executive Contract Research Report 436/2002.

Michael Wright, Rebecca Lancaster, Catherine Jacobson-Maher Medha Talwalkar and Tony Woolmington. Evaluation of Good Health is Good Business. Health and Safety Executive Contract Research Report 2000.

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APPENDIX A: Final postal questionnaire

The questionnaire was presented on four pages. It is represented here on six pages due to the reduced margins in this report.

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About this survey The Health and Safety Executive (HSE) has commissioned this survey. They would like to hear your opinion.

The cost and availability of Employers’ Liability insurance has recently been the subject of debate in the press and an ongoing review by the Department for Work and Pensions (DWP). Previous surveys have shown that the cost is increasing, and there is some evidence that it is becoming more difficult to get insurance. The Health and Safety Executive (HSE) is assisting DWP in this work and would like to hear your opinion on this.

Greenstreet Berman Ltd has been asked to carry out this anonymous survey on behalf of the HSE.

Who should respond The person who deals with the Employers’ Liability insurance for your organisation should complete the questionnaire. (Note that you may have a combined insurance policy which includes Employers’ Liability (along with for example, public liability, buildings, contents, etc)).

Anonymity

We can assure you of complete anonymity.

You do not need to give us your company name or contact details. Greenstreet Berman Ltd is an independent research and consultancy organisation. Please visit our website at www.greenstreet.co.uk or call Sara Marsden on 0118-938-7702 if you want further information about the company or survey.

If you need health and safety advice, please contact HSE Infoline (details on the back of this booklet).

The questionnaire should take no longer than 5 minutes to complete. Please return it to Greenstreet Berman in the reply paid envelope provided. Your help would be gratefully received.

Greenstreet Berman Ltd, Fulcrum House, 5 Southern Court, South Street, Reading, RG1 4QS Telephone: 0118-938-7700 (switchboard) or Sara Marsden on 0118 938 7702

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1. How many people does your entire organisation employ in the UK (not including Northern Ireland)?

Circle one number only

0 1 2 3 4 5

j

No employees Under 10 employees

11 to 50 employees

51 to 250 employees

251 to 1,000 employees

Over 1,000 employees

If you do not have any employees this questionnaire is not relevant to you, so you need not continue.

2. What is your ob title? Such as Managing Director, Personnel Director etc

3. In which region is your organisation’s head office located? (These are HSE’s regions - please check for your county)

South West (Avon, Cornwall,

Devon, Dorset, Gloucestershire,

Somerset, Wiltshire)

a Central England (Bedfordshire,

Buckinghamshire, Hertfordshire,

Oxfordshire)

e East Midlands (Derbyshire,

Leicestershire, Lincolnshire,

Nottinghamshire)

i

South East, excl Greater London (Berkshire, Hampshire,

I.O.Wight, Kent, Surrey, Sussex)

b West Midlands (Hereford &

Worcester, Shropshire, Staffordshire,

Warwickshire, West Midlands)

f North East (Cleveland &

Humberside, Durham, Northumberland,

Tyne & Wear, Yorkshire)

j

Greater London c East England (Cambridgeshire,

Essex, Norfolk, Suffolk)

g North West (Cheshire, Cumbria,

Lancashire, Manchester, Merseyside) k

Scotland d Wales h

Yes No

1 2

1 2

1 2

4. Is your organisation a member of a trade association or professional body?

5. Are some of your workers or contractors paid in cash?

6. Do you have any written risk assessments?

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0 1 2 3 4 5 More

Circle one

9. In the past 3 years, how many times have any of your employees sued your organisation for an injury/illness they got at/from work?

6 - 10 11-19 than 20

=

Circle one

7. For how many years has your organisation <Less 1 2 3 4 5 6 to 10 More had employees? than 1 than 10

To what extent do you agree with the following statement (circle one number)

Strongly

agree Agree Unsure Disagree

Strongly

disagree

8. The hazards in our workplace(s) can pose a high risk

1 2 3 4 5

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10. Which of the categories below best describe the type of work your organisation does?

Circle numbers for all that apply

Agriculture, forestry 1 Education Manufacturing

Chemicals/pharmaceuticals/ petroleum 45 Charities & membership organisations

2 Nursery 25

Stone, clay etc products 46

Catering, incl pubs & restaurants 3 Primary 26 Food & drink or tobacco 47

Central government 4 Secondary 27 Engineering, machinery & metal goods 48

Construction Tertiary 28 Consumer goods (textiles, toys, furniture, etc) 49

General builder 5 Training 29 Plastics/rubber 50

General maintenance 6 Professional body 30 Paper & allied products 51

House building 7 Emergency services 31 Media & publishing 52

Civil engineering 8

Demolition 9

Financial services (e.g. insurance, banking)

32 Professional services (e.g. legal, accountancy)

53

Scaffold erection 10

Carpenters 11

Health care Business to business services (e.g. marketing, consultancy, IT, recruitment)

54

Glazing 12

Road construction 13

Care homes 33 Personal services (e.g. laundry, estate agents, hairdresser, beautician)

55

Roofing 14 Hospital 34 Retail & wholesale 56

Repairs 57 Decoration 15 Primary care (dental, opticians, GPs, etc)

35

Social services 58

Electrician 16 Psychiatric 36 Telecommunications 59

Plumbing 17 Other healthcare 37 Transport services

Plastering 18 Hotels & other lodging places 38 Rail 60

Ground works 19 Leisure & entertainment Bus 61

Asbestos removal 20 Adventure 39 Car 62

Other construction 21 Amusement parts 40 Coach 63

Extraction Sports & swimming 41 Shipping 64

Mining 22 Museums, libraries etc 42 Air 65

Quarries 23 Clubs, theatres, cinemas 43 Haulage/freight 66

Oil & gas extraction 24 Local government 44 Utility (electrical, water & gas) 67

Other Please specify

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11. In the last year has the cost of Employers’ Liability insurance caused your organisation to do any of the following? (circle all that apply)

Yes No, but considered

it

Not at all

a. Ceasing trading 1 2 3

b. Reduce salaries or bonuses 1 2 3

c. Cut jobs 1 2 3

d. Significantly increase prices 1 2 3

e. Stop carrying out certain types of work or activities 1 2 3

f. Switch insurers 1 2 3

g. Contest more claims for compensation 1 2 3

h. Try to improve health and safety performance 1 2 3

i. Reduce investment in the organisation 1 2 3

j. Try to avoid recruiting people prone to injury or ill-health 1 2 3

k. Other, please describe in box at bottom of page 4 1 2 3

Yes No

Don’t Know

12. Did your insurer for last year refuse to renew your Employers’ Liability insurance policy this year? 1 2 3

13. Have you had any difficulty, greater than before, in obtaining employers’ liability insurance for the current year? 1 2 3

14. Do you have a current Employers’ Liability insurance policy? 1 2 3

15. Do you have a combined liability insurance policy including employer’s liability, and covering a range of other risks such as public liability, buildings insurance, etc.

1 2 3

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Only answer question 16 if you do not have a current Employers’ Liability insurance policy.

because: ( ) Yes No

a. 1 2

b. 1 2

c. 1 2

d. 1 2

e. 1 2

f. 1 2

g. 1 2

h. 1 2

I 1 2

j 1 2

16. If you do not have a current Employers’ Liability insurance policy, is this Please answer all questions

You didn’t think you needed it

You don’t have any employees

You cannot afford to pay the premium

You have been refused cover by all insurers approached

You have ceased trading or you are insolvent

You are exempt from the Employers’ Liability Compulsory Insurance regulations (e.g. crown employer or you only employ family members)

You have forgotten to renew your policy

You do not intend to renew your policy

You are trying to, and are having difficulty in getting or renewing your Employers’ Liability

Other Please state reasons in comments box below

Please offer any other comments/concerns on Employers’ Liability insurance that you wish to make. (Please attach an extra sheet if you need to.)

Many thanks for your help in completing thisquestionnaire

If you need any health and safety advice, please contact HSE Infoline: Tel 08701-545000 (Monday to Friday 8.30am – 5pm) email

[email protected]

HSE’s website is http://www.hse.gov.uk

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http://www.hse.gov.uk

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APPENDIX B: Tabulated questionnaire results

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Size Class Number Respondents As a % of all respondents 1-10 (micro) 1004 41.20% 11-50 (small) 536 21.99% 51-250 (medium) 560 22.98% 251-1000 (large) 200 8.21% 1000+ (v large) 137 5.62% 1-50 (small) 1540 63.19% 51-250 (medium) 560 22.98% 251 + (large) 337 13.83% Total Respondents with employees 2437 100.00%

Geographical Area 1-10 11-50 51-250 251-1000 1000+ (v All (micro) (small) (medium) (large) large)

Greater London 98 91 77 33 25 324 South East 161 87 73 28 28 377 South West 108 47 48 8 8 219 East Midlands 43 24 31 12 5 115 West Midlands 101 51 26 2 8 188 East England 60 30 45 8 7 150 Central England 45 22 28 7 5 107 North East 152 82 89 49 24 396 North West 91 40 81 34 15 261 Scotland 92 43 49 14 11 209 Wales 46 14 11 4 1 76 All 997 531 558 199 137 2422

Geographical Area 1-10 11-50 51-250 251-1000 1000+ (v All (micro) (small) (medium) (large) large)

Greater London 13.38% 9.83% 17.14% 13.80% 16.58% 18.25% South East 15.57% 16.15% 16.38% 13.08% 14.07% 20.44% South West 9.04% 10.83% 8.85% 8.60% 4.02% 5.84% East Midlands 4.75% 4.31% 4.52% 5.56% 6.03% 3.65% West Midlands 7.76% 10.13% 9.60% 4.66% 1.01% 5.84% East England 6.19% 6.02% 5.65% 8.06% 4.02% 5.11% Central England 4.42% 4.51% 4.14% 5.02% 3.52% 3.65% North East 16.35% 15.25% 15.44% 15.95% 24.62% 17.52% North West 10.78% 9.13% 7.53% 14.52% 17.09% 10.95% Scotland 8.63% 9.23% 8.10% 8.78% 7.04% 8.03% Wales 3.14% 4.61% 2.64% 1.97% 2.01% 0.73% All 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

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Sector Number of sector Total number % Respondents of % Responses of respondents (D&B

categorised) of responses to sector (by all

all respondents all Responses

sectors) Agriculture 157 91 6.39% 2.63% Banking 33 35 1.34% 1.01% Construction 305 878 12.41% 25.41% Education 127 267 5.17% 7.73% Hotels & Catering 112 485 4.56% 14.04% Health & Social 484 141 19.69% 4.08% Local Authority 137 65 5.57% 1.88% Manufacturing 436 427 17.74% 12.36% Other Services 352 545 14.32% 15.77% Retail & Repairs 189 313 7.69% 9.06% Telecommunications 23 8 0.94% 0.23% Transport 76 148 3.09% 4.28% Utilities 27 52 1.10% 1.51% Totals 2458 3455 100.00% 100.00%

Sector Number Number of % Responses of % Respondents of all Responses Respondents (self all Responses respondents

categorised) Agriculture 91 91 2.63% 3.22% Charities 52 52 1.51% 1.84% Catering 102 102 2.95% 3.61% Central Government 5 5 0.14% 0.18% Construction 878 410 25.41% 14.50% Extraction 26 22 0.75% 0.78% Education 267 197 7.73% 6.97% Emergency Services 8 8 0.23% 0.28% Financial Services 35 35 1.01% 1.24% Health Care 474 443 13.72% 15.67% Hotels 39 39 1.13% 1.38% Leisure 49 40 1.42% 1.41% Local Gov 52 52 1.51% 1.84% Manufacturing 427 405 12.36% 14.33% Media & Publishing 58 58 1.68% 2.05% Professional Services 131 131 3.79% 4.63% Business-Business 60 60 1.74% 2.12% Personal Services 195 195 5.64% 6.90% Retail & Wholesale 269 269 7.79% 9.52% Repairs 44 44 1.27% 1.56% Social Services 11 11 0.32% 0.39% Telecoms 8 8 0.23% 0.28% Transport 148 124 4.28% 4.39% Utility 26 26 0.75% 0.92% TOTALS 3455 2827 100.00% 100.00%

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Sector Sub-sector Number Responses % Responses of all sector Responses

% Responses of all sector respondents

Construction 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21

108 12.30% 80 9.11% 47 5.35% 48 5.47% 26 2.96% 27 3.08% 74 8.43% 38 4.33% 27 3.08% 45 5.13% 44 5.01% 66 7.52% 62 7.06% 33 3.76% 63 7.18% 15 1.71% 75 8.54%

26.34% 19.51% 11.46% 11.71% 6.34% 6.59% 18.05% 9.27% 6.59% 10.98% 10.73% 16.10% 15.12% 8.05% 15.37% 3.66% 18.29%

Extraction 22 23 24

6 23.08% 14 53.85% 6 23.08%

27.27% 63.64% 27.27%

Education 25 26 27 28 29 30

82 30.71% 47 17.60% 71 26.59% 19 7.12% 37 13.86% 11 4.12%

41.62% 23.86% 36.04% 9.64% 18.78% 5.58%

Health Care 33 34 35 36 37

101 21.31% 25 5.27%

288 60.76% 9 1.90% 51 10.76%

22.80% 5.64% 65.01% 2.03% 11.51%

Leisure 39 40 41 42 43

11 22.45% 6 12.24% 23 46.94% 4 8.16% 5 10.20%

27.50% 15.00% 57.50% 10.00% 12.50%

Manufacturing 45 46 47 48 49 50 51

38 8.90% 15 3.51% 55 12.88%

165 38.64% 90 21.08% 26 6.09% 38 8.90%

9.38% 3.70% 13.58% 40.74% 22.22% 6.42% 9.38%

Transport 60 61 62 63 64 65 66

3 2.03% 11 7.43% 33 22.30% 10 6.76% 26 17.57% 9 6.08% 56 37.84%

2.42% 8.87% 26.61% 8.06% 20.97% 7.26% 45.16%

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Title Under 10 11-50 51-250 251-1000 1000+ All Accountant 10 13 19 12 3 57 Administrator 12 10 23 5 3 53 Bursar 1 2 28 3 0 34 CEO 2 5 5 2 0 14 Chairman 1 4 8 3 0 16 Clerk 13 10 2 0 0 25 Company secretary

36 31 50 27 21 165

Director 94 67 125 58 27 371 Executive Officer 0 0 0 0 1 1 Manager 126 127 109 56 65 483 Managing Director 145 114 110 18 1 388 not stated 67 34 32 12 7 152 Other 32 13 13 2 9 69 Owner 464 99 28 1 0 592 Principal / head teacher

1 7 8 1 0 17

All 1004 536 560 200 137 2437

Size Class Professional body/Trade association member

Possess written risk assessments

Some workers paid cash

Total n n % n % n % Under 10 (micro) 1004 530 52.79% 507 50.50% 349 34.76% 11-50 (small) 536 349 65.11% 432 80.60% 98 18.28% 51-250 (medium) 560 413 73.75% 510 91.07% 46 8.21% 251-1000 (large) 200 146 73.00% 190 95.00% 7 3.50% 1000+ (v large) 137 104 75.91% 131 95.62% 10 7.30% 1-50 (small) 1540 879 57.08% 939 60.97% 447 29.03% 51-250 (medium) 560 413 73.75% 510 91.07% 46 8.21% 251+ (large) 337 250 74.18% 321 95.25% 17 5.04% All 2437 1542 63.27% 1770 72.63% 510 20.93%

Sector Total respondents in sector Number paid in cash % of sector respondents Agriculture 157 27 17.20% Banking 33 0 0.00% Construction 305 27 8.85% Education 127 13 10.24% Health & Social 112 60 53.57% Hotels & Catering 484 65 13.43% Local Authority 137 14 10.22% Manufacturing 436 59 13.53% Other services 352 144 40.91% Retail & Repairs 189 73 38.62% Telecommunication 23 11 47.83% Transport 76 18 23.68% Utilities 27 0 0.00% All Sectors 2458 511 20.79%

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Sector Total respondents (self-categorised) Number paid in cash

Agriculture 91 16 Charities 52 5 Catering 102 56 Central Government 5 1 Construction 410 45 Extraction 22 0 Education 197 33 Emergency Services 8 1 Financial Services 35 5 Health Care 443 55 Hotels 39 10 Leisure 40 14 Local Gov 52 6 Manufacturing 405 55 Media & Pub 58 9 Professional Services 131 12 Business-Business 60 4 Personal Services 195 118 Retail & Wholesale 269 96 Repairs 44 13 Social Services 11 0 Telecoms 8 0 Transport 124 27 Utility 26 1

% of sector respondents

17.58% 9.62% 54.90% 20.00% 10.98% 0.00% 16.75% 12.50% 14.29% 12.42% 25.64% 35.00% 11.54% 13.58% 15.52% 9.16% 6.67% 60.51% 35.69% 29.55% 0.00% 0.00% 21.77% 3.85%

number of years Size class <1 1 2 3 4 5 6-10 >10 Total 1-10 (micro) 23 12 31 33 31 43 174 651 998 11-50 (small) 1 2 5 8 9 8 56 447 536 51-250 (medium) 0 0 5 4 2 3 32 513 559 251-1000 (large) 0 1 4 2 1 0 3 188 199 1000+ (v large) 0 1 2 2 0 0 2 130 137 1-50 (small) 24 14 36 41 40 51 230 1098 1534 51-250 (medium) 0 0 5 4 2 3 32 513 559 251+ (large) 0 2 6 4 1 0 5 318 336 All 24 16 47 49 43 54 267 1929 2429

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number of years Size class <1 1 2 3 4 5 6-10 >10 Total 1-10 (Micro) 2.30% 1.20% 3.11% 3.31% 3.11% 4.31% 17.43% 65.23% 100.00% 11-50 0.19% 0.37% 0.93% 1.49% 1.68% 1.49% 10.45% 83.40% 100.00% 51-250 (Medium) 0.00% 0.00% 0.89% 0.72% 0.36% 0.54% 5.72% 91.77% 100.00% 251-1000 0.00% 0.50% 2.01% 1.01% 0.50% 0.00% 1.51% 94.47% 100.00% Over 1000 (V large) 0.00% 0.73% 1.46% 1.46% 0.00% 0.00% 1.46% 94.89% 100.00% 1-50 (small) 1.56% 0.91% 2.35% 2.67% 2.61% 3.32% 14.99% 71.58% 100.00% 51-250 (medium) 0.00% 0.00% 0.89% 0.72% 0.36% 0.54% 5.72% 91.77% 100.00% 251+ (large) 0.00% 0.60% 1.79% 1.19% 0.30% 0.00% 1.49% 94.64% 100.00% All 0.99% 0.66% 1.93% 2.02% 1.77% 2.22% 10.99% 79.42% 100.00%

Number of claims Size class 0 1 2 3 4 5 6-10 11-20 >20 Total 1-10 (micro) 975 23 2 1 1 0 0 2 1004 11-50 (small) 482 27 14 7 2 2 0 1 0 535 51-250 (medium) 344 88 46 21 19 10 16 7 3 554 251-1000 (large) 36 16 21 23 9 10 35 17 29 196 1000+ (v large) 12 2 4 2 4 3 16 14 76 133 1-50 (small) 1457 50 16 8 3 2 0 1 2 1539 51-250 (medium) 344 88 46 21 19 10 16 7 3 554 251+ (large) 48 18 25 25 13 13 51 31 105 329 All 1849 156 87 54 35 25 67 39 110 2422

Size class Number of construction organisations % of all construction organisations 1-10 (micro) 120 40.00% 11-50 (small) 54 18.00% 51-250 (medium) 84 28.00% 251-1000 (large) 29 9.67% 1000+ (v large) 13 4.33% 1-50 (small) 174 58.00% 51-250 (medium) 84 28.00% 251+ (large) 42 14.00% All 300 100.00%

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Printed and published by the Health and Safety ExecutiveC30 1/98

Printed and published by the Health and Safety ExecutiveC1.10 12/03

9 78071 7 627967

ISBN 0-7176-2796-9

RR 188

£15.00

research report 188 - hse: information about … health & safety executive survey of compliance...

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