Claim culture costs industry dear

Claim culture costs industry dear

The compensation culture is putting an increasing burden on British industry, the CBI has warned.

The employers' organisation is calling for business insurance to be reformed urgently.

UK businesses saw a rise in insurance premiums of almost 50% last year.

The CBI blames this increase primarily on the number of compensation claims.

People are more aware of their rights and more willing to take legal action

Digby Jones, director general, CBI

And it also cites falling equity markets, an increase in the range of industrial disease, and a rise in damages awarded by the courts in its report for the government's review of business insurance.

The CBI wants the "have-a-go" mentality of compensation claims to be curbed by having more pre-trial arbitration and making unsuccessful claimants bear more of the costs.

It wants Chancellor Gordon Brown to pass on some of the Treasury's £300m windfall from the rise in insurance tax revenue to businesses.

System abuses

Digby Jones, CBI director-general, said: "The unsustainable rise in insurance premiums is happening at the worst possible moment for many in business.

"One of the biggest issues is that people are more aware of their rights and more willing to take legal action.

"This is not in itself a bad thing but it makes it even more important to stop abuses of the system."

The insurance industry increased premiums after, in 2001, rising claims meant that it paid out £1.30 for every £1 taken in premium income.

But, because of falling equity markets, it has been increasingly difficult to offset losses through investments.

The September 11 attacks cost the industry £46bn, the CBI said.

'Industrial diseases'

Other reforms include considering whether the public sector should absorb the costs of compensation claims from those with "latent industrial diseases", such as asbestosis.

The CBI also suggests linking insurance premiums to a company's health and safety performance.

The Labour Force Survey, a study by the Office for National Statistics, estimates about 1 million workers suffer work-related injuries each year.

By law companies have to take out insurance so workers can get compensation for work-related injuries caused by employer negligence.