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Wednesday, 21 August, 2002, 15:28 GMT 16:28 UK
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The government has agreed to explore ways of preventing small firms from going under because of steep rises in employer liability insurance.

Senior Treasury officials said they would look into ways of tackling the problem during a meeting earlier on Wednesday with Mike Williams, chief executive of the British Insurance Brokers' Association.

"This is the first time they've realised that this is a serious problem," said a BIBA spokesperson, who described the meeting as "successful."

BIBA claims that 500 small and medium-sized firms have gone out of business this year because of a sharp increase in employer liability premiums, while a further 10,000 are at risk.

Financial squeeze

The higher premiums reflect a rise in successful claims against employer liability policies, which insure employers against the cost of legal action by staff injured at work.

Mr Williams, speaking earlier on Wednesday to BBC Radio 4's Today programme, also blamed this year's stock market slump, which has put insurance companies under added financial pressure.

"There have been increases in premiums of 50%, 100%, 500% and 1,000% over the last few months," he said.

BIBA believes that while some firms have gone out of business when faced with unaffordable premium increases, others have chosen to continue trading without insurance - in breach of UK law.

Big businesses, better able to absorb sudden cost increases, have been less seriously affected.

Remedies

BIBA is calling on insurers to offer liability cover to employers via "pooling" arrangements, with several large companies spreading the cost of claims between them.

It is also pushing for the government to impose strict limits on compensation payments for injuries sustained at work.

Employers have been legally obliged to take out employee liability cover since 1969.

But BIBA claims the legislation does not offer employers enough protection against rising numbers of claims, fuelled in part by a growing "compensation culture".

See also:

16 Aug 02 | Business
15 Aug 02 | Business
30 Jan 02 | Business
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