Insurance2day Insurance Services Ltd

Following our post about Royal & Sun Alliance withdrawing from the lower end of the solicitors professional indemnity insurance market the insurance trade press is now referring to the approaching ‘Crisis’ in the market. Zurich expect that solicitors professional indemnity rates across their book of business could increase by 20% over however they are looking at an overall growth in business. Novae along with other insurers are thought to be viewing the market cautiously paying particular attention to claims trends.

On June 11 2008 we posted an article about Employer’s Liability Insurance explaining that current legislation requires Certificates of Employers’ Liability cover to be displayed at all business premises and copies retained for forty years. The government are now looking into proposals to scrap the requirement for certificates of insurance to be retained for 40 years from 1 October 2008 which could leave companies financially exposed as insurers can only respond to claims when the insurer on cover at the time of exposure to any long tail injury/disease can be identified. For periods where insurer details cannot be identified full liability lies with the company. Additionally such a change in legislation would put increased pressure on the Association of British Insurers’ voluntary Employer’s Liability Insurance Tracing Code. An ideal alternative to companies retaining their own records would be for a national database to be set up similar to that currently operational for car insurance, so that all Employer’s Liability Insurance could be automatically recorded. Since like motor insurance Employer’s Liability Insurance is a statutory requirement this would offer an ideal solution.

Insurers fear that come October 2008 there will be a shortage of accredited energy assessors for commercial properties. From October 2008 it will be a requirement of European Union’s Energy Performance Directive (EPBD) that all commercial buildings in the United Kingdom have an Energy Performance Certificate when they are constructed, sold or let.

Energy Assessment of Commercial Buildings:

Energy Assessment of Commercial Buildings requires a different approach to the production of residential EPCs. The energy certificate also requires the calculation of a carbon index for the commercial or industrial building.

Commercial property is more complex in design and construction than domestic property and Commercial Energy Assessors will require EPC software specifically designed for the task.

Training:
Further training for domestic energy assessors (DEAs) is most likely as different standards apply for the energy assessment of commercial and industrial buildings, assessments can only be carried out by “non-domestic energy assessors” or a Commercial Buildings Energy Assessor (CEA). Currently Training Providers are limited for Energy Assessors seeking a course in Commercial Property Energy Assessment. As such, qualifications based on the new Occupational Standards are not yet available, however the developers have worked closely with the UK Government for the standards to be adopted.

Property Types:

“New Build” Residential
Energy Ratings for “New Build” dwellings will require an EPC using the SAP energy rating system.

New and Existing Commercial and Industrial Structures
Commercial and Industrial units (New Build and Existing Structures), will adopt the SBEM (Simplified Building Energy Model) method. SBEM is a computer software based model to establish energy ratings for the production of energy performance certificates. For extremely large complex structures a system known as DSM (Dynamic Simulation Model) has been developed.

Public Buildings
For public buildings a DEC - Display Energy Certificate must be obtained, in addition, for all buildings subject to rental, or lease, Air Conditioning Inspection is required and a survey of boiler and heating controls undertaken by qualified engineers for the completion of an advisory report.

Different Methods of Commercial Buildings Energy Assessment:

There are basically 3 methods of energy assessment:

SAP - Standard Assessment Procedure Calculations
SBEM - Simplified Building Energy Model
DSM - Dynamic Simulation Model

The new Corporate Manslaughter and Corporate Homicide Act which came into effect last month will have far reaching implications for all organisations that employ people. The Act has created a new offence whereby an organisation could be found guilty if the manner in which its activities are managed or orchestrated by senior management (those who play a significant role in management and organisational decision making or those involved in the actual management of activities) results in death which amounts to a gross breach of a duty of care to the deceased.

In deciding whether an organisation is guilty a jury will take into account breaches of Health & Safety policies procedures as well as the overall approach of the company towards Health & Safety

Where a company’s actions, or inactions, amount to a gross breach of the duty of care resulting in death then the following Court Penalties can apply:

1. Unlimited fines

2. Publicity Orders – guilty companies must place advertising notices of convictions in the local and/or national press.

3. Remedial Orders – the Courts can make these orders to force companies to take the required steps to remedy the failures which resulted in the conviction..

In addition for a company defending their position this can prove costly in terms of both ‘man hours’ and legal representation costs. If legal expense cover is operational then depending on the scope of cover and policy wording the policy may respond to the costs of defending such a claim so long as the legal expense insurer is notified immediately. Directors & Officers insurance policies however are unlikely to respond as the claim would be made against the corporate bodies and not individual directors and officers of a company.

Any company that has faced an employment tribunal will know that the costs of defending their position are high, in terms of risk every company that has employees is at risk of being taken to a tribunal. In the current economic climate this risk is further exacerbated as redundancies may result in disgruntled ex-employees claiming unfair dismissal due to age, race etc.

The number of employment disputes going to tribunal are on the increase therefore we recommend that companies consider insuring against the risks by taking out Employment Practices Liability insurance which can be arranged as a stand alone policy or as an extension to an Directors and Officer insurance policy. Even if an employer successfully defends itself at a tribunal the legal costs are likely to run into thousands of pounds whereas Employment Practices Liability insurance cover can be arranged from £367.50.

The Chartered Institute of Insurance has launched a new professional qualification for retails and specialist insurance brokers on insurance broking practices – previously there has been no such course specifically aimed at brokers. The diploma will cover areas which brokers need to be well versed in to ensure compliance with the Financial Services Authority regulations e.g. regulatory requirements, conduct of business, clients needs analysis, the broking of risks, claims management and risk services to name but a few.

Royal & Sun Alliance have made the decision to stop offering professional indemnity insurance cover to one man and/or two-partner firms of solicitors though it will continue to offer renewal terms to existing clients. The annual renewal season for solicitors has just commenced with all firms having to arrange cover for the annual renewal date of 1 October. A hardening market overall is also predicted and it is anticipated that rating increases of 20% will apply across the board.

Update - 21 July 2008: Royal & Sun Alliance have since advised that they will also decline to offer professional indemnity insurance renewal terms for one man and/or two-partner firms of solicitors this year.

The last ten years has seen significant consolidation in the insurance company market and it now looks like the next three years are going to see a number of mergers and acquisitions in the Lloyds of London marketplace with the number of Lloyds brokers diminishing. It is thought that proposed changes to The Lloyd’s Act may be a contributing factor as well as limited options in terms of market access.

Consumers are becoming increasingly confident in using technology to make purchases online - Insurance2day have looked at the possibility of offering a full e-commerce website however due to the complexities of commercial and professional indemnity insurance the concern would be that consumers purchase online only to later discover that the scope of their business activities are not fully covered by the policy incepted. By evaluating each hold cover request on its merits Insurance2day feel confident in being able to best match a consumers requirements to the most suitable insurance policy available. At this point in time therefore Insurance2day do not intend to further increase the functionality of the website to incorporate full e-commerce technology.

It is anticipated that the next twelve months will see further increases in the number of small to medium size (SMEs) business arranging their commercial insurances online. Whilst at the higher end of the markets businesses paying premiums in excess of £50,000 are unlikely to benefit from the ever increasing move towards e-commence smaller to medium sized companies are definitely benefiting from the growing product range and ease of transaction that the internet is now offering in the fields of commercial, liability, professional indemnity and directors and officers insurance.