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The Government
is considering waiving the requirement to
obtain employers' liability insurance for
limited companies that employ only their owner.
This would bring the treatment of these companies
into line with unincorporated businesses and
would lift the requirement to insure from
over 300,000 of the smallest businesses. A
report is promised by March 2004.
Costs for employers' liability insurance
have grown. Premiums rose by an average of
50% in 2002, according to a study by the Office
of Fair Trading (OFT), although some sectors
suffered much larger increases. Small and
medium-sized enterprises have been hit particularly
hard, as have high-risk businesses such as
roofing and scaffolding. The rise continued,
though at a lower rate, in 2003, and it is
predicted that increases will average 10-15%
in 2003/04.
Employers' liability insurance is compulsory.
The legal minimum cover is £5 million
and certificates must be displayed in the
workplace. The OFT report examined claims
that some businesses had been unable to obtain
insurance at any price but came to no definite
conclusion. Although the OFT found no evidence
of a widespread withdrawal of insurance, some
insurers were quoting prices so high as to
amount to an effective refusal of cover.
Several factors have caused the increases,
including greater levels of employee litigation,
the general increase in insurance costs following
the terrorist atrocities of 11 September 2001
and the growing cost of resolving claims.
The Government is working with employers,
trade unions, lawyers and others to improve
the claims resolution process and reduce the
sometimes excessive legal costs.
If your insurance quote has increased excessively,
you should try shopping around. Some insurers
are specialising in those sectors where they
have the greatest knowledge or expertise in
assessing or pricing the risk. It is often
possible to reduce premiums by accepting a
greater level of policy exclusions. However,
you should consider the impact on your business
of having to meet a greater part of the cost
of a claim yourself. Buying employers' liability
insurance as part of a general business insurance
package may be easier and cheaper.
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