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An increasing number of U.K. companies are waking up to the high cost of not managing their employers liability exposure more aggressively.
Rather than merely transfer the risk to an insurer for a costly premium, more U.K. employers are finding that they can reduce their costs and keep a more productive work force by taking steps to reduce the number of illnesses and injuries and by working more closely with disabled workers to get them back on the job.
Many of these disability management practices are being imported into the U.K. market by international insurers and employers that have seen how widely used and successful they have been for U.S. employers.
This shift in attitude follows a crisis of capacity and affordability in the U.K. employers liability insurance market in the early 1990s. Continued increases in the size and frequency of employers liability claims also have forced a change in risk managers' thinking.
"The move toward more complete management of employers liability (risks) is still in its embryonic stage in the U.K. but, as in the U.S., it is a trend that will develop," said David Thomas, a principal in London of Willis Risk Solutions, a division of Willis Corroon P.L.C.
The Assn. of Insurance & Risk Managers is finalizing work on a model disability management program for U.K. employers.
The goal of the program is to first identify and measure the total cost of occupational and non-occupational illness and injuries among workers, coordinating the efforts of various internal departments. The next step is to devise model programs for controlling and reducing the costs of worker disability.
The AIRMIC program, titled "Good Health-Good Management," is being developed by a range of professionals involved in employee health care, including risk managers, occupational health specialists, and officials from corporate health and safety and human resource departments.
"In many companies, several departments -- such as human resources, health and safety and insurance -- currently all work in isolation. We have developed a program which will enable the various departments to work together to identify and measure the costs of employee sickness, absence and injury and to get handle on the issue," said Donna Thomas, an independent consultant who is helping coordinate the project.
The whole issue of managing disability costs is still relatively unknown in many U.K. companies, said Ms. Thomas. She said initiatives such as health screening, claims management, analyzing claims data and adopting early-return- to-work programs are infrequently used.
"We are developing the program because there was a need for it. Nobody had a handle on what sickness was costing their corporations," said Ms. Thomas.
AIRMIC's health management program is being tested in several companies and is likely to be made available to other U.K. employers next year, said AIRMIC Chief Executive David Gamble.
One U.K. company focusing on keeping workers healthy is chemical conglomerate ICI P.L.C., one of the United Kingdom's largest industrial companies.
In the past few years, ICI has made a major drive to focus management on employee health issues, said ICI's chief medical officer, Dr. John Ferguson-Smith. "We have been doing a lot of work to underline that line managers at all levels are responsible for health in the same way as they are responsible for safety and the environment," he said.
"In recent years, occupational health has become much more focused and an integral part of the business process. Line managers quite readily accept ownership and responsibility for improving health," Dr. Ferguson-Smith said.
ICI is focusing on educating its management and employees on occupational health issues with the "emphasis always on prevention rather than tidying up afterwards," he said.
The company has refined its reporting system for work-related ailments so it can better track specific health risks. For example, it has added new categories for specific skin-related problems, respiratory problems and repetitive trauma, including noise-induced hearing loss as well as upper-limb disorders.
ICI also has introduced health-related performance indicators, as well as comprehensive workplace risk assessments, from ergonomics analyses to safety hazard inspections. And the company has an active rehabilitation policy.
"Getting people back into the workplace as soon as possible is in everyone's best interest," said Dr. Ferguson-Smith.
Insurers are taking the lead in helping U.K. companies better manage their employers liability exposure. One such company is AIG Europe (UK) Ltd., a subsidiary of New York-based American International Group Inc.
Concerned by the length of time taken to resolve EL claims and the fact that many U.K. employers have not adopted the type of disability management programs practiced in the United States, AIG's EL claims team decided to reform the way it tackled EL risks in the United Kingdom, said Steve Eckhardt, U.K. and Ireland claims manager for AIG.
"Our view was that we needed to approach EL differently. We formed a special risk management claims unit in April 1996. . .whose real innovation came last year when a qualified nurse joined the team," he noted.
The unit's aim was to reduce policyholders' costs by developing an early-return-to-work program for injured employees; identifying ways for clients to reduce the risk of EL claims; reducing the time taken to settle EL claims; developing a system to remove the adversarial approach to claims handling; and putting the emphasis on the recovery and care of the employee, according to Mr. Eckhardt.
One of the most crucial areas identified by AIG in cost containment was to reduce legal costs by speeding up the process for settling a claim and making the process less adversarial.
The company has devised standard injury report forms, in collaboration with the British Orthopaedic Society and the Law Society, to make it easier for employers to obtain detailed medical reports on worker injuries.
On receipt of a claim for compensation, the injured worker's lawyer is immediately advised that action is being taken and is provided with a copy of the medical report. "This approach has led to a more open and amicable dialogue" between insurer and plaintiff, according to Mr. Eckhardt.
In addition, the investigation of the employer's liability for a worker's claim is handled separately from an investigation of the medical needs of the employee, which is dealt with by a nurse focused on getting the employee back to work.
"Due to the fact that the vast majority of all claims dealt with under this system are concluded quickly and without the need to resort to litigation, there is a dramatic and substantial reduction in legal costs," he said.
The success of the program led AIG to form a separate company this year. Called AIG Medical & Rehabilitation Ltd., it specializes in managing the care of the injured worker and returning him or her to work.
Another insurer adopting a new approach to EL underwriting in the United Kingdom is Bermuda-based EXEL Ltd., which recently launched a new U.K. company specializing in EL insurance.
XL Prevent, which is owned by Dublin, Ireland-based XL Europe Insurance, offers "a new approach" to EL insurance, according to General Manager Terry Nichol.
"We aim to give companies something other than simply financial protection. We want to give them educational support and advise them on how to achieve best risk management practice," said Mr. Nichol.
XL Prevent has launched an integrated risk management and insurance product called EMPHASIS, or Employers' Health & Safety & Insurance Support. In addition to underwriting liability coverage, the EMPHASIS program has a network of risk advisory units in Manchester, England; Dublin; Burton upon Trent, England; Glasgow, Scotland; and Harrogate, England; a risk and claims management center in Newcastle upon Tyne, England; and a risk evaluation center in London.
The company offers long-term liability insurance contracts, typically of three years or more, using both conventional and non-conventional financial products. As part of the contracts, risk management services are provided to all policyholders.
"We make sure companies have good reporting and recording procedures for incidents, including near- misses, and use that information pro-actively," said Mr. Nichol.
The company also ensures claims are dealt with speedily and, through a partnership with Liberty Risk Services, provides a range of health and safety research and consulting and training services.
Mr. Nichol emphasized that the risk management support is continuous throughout the insurance contract, not merely provided as an initial loss prevention survey.
XL Prevent currently offers a standard limit of L10 million ($17 million) for EL and L5 million ($8.5 million) for public and products liability, said Mr. Nichol.
While XL Prevent is focusing initially on claims prevention and management, the company also plans to increase its rehabilitation services in the future.
"I believe rehabilitation is the future. There needs to be a change in attitude" among employers and injured employees, said Mr Nichol. Instead of focusing on damages, the focus must instead be on the injured person, maximizing their recovery and helping them back to work as soon as possible, he explained.