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Working Lunch Tuesday, 25 February, 2003, 16:20 GMT
Call to solve insurance debacle
Model railway
Even model railway clubs are suffering
Long-term proposals have been put forward to help resolve the problem of soaring premiums for liability insurance.

Exorbitant costs have forced many companies to operate without cover for their staff and members of the public.

It's an issue we've been covering on Working Lunch for several months.

It's affecting scaffolders, window cleaners - even a model railway club, which needs public liability insurance.

Dean Onstenk
Dean Onstenk: "It will cripple our business"
The rise over the last couple of years is going to cripple our business in the long run," says Dean Onstenk of 4D Contracts, a Suffolk paint company.

"It's bad enough it's gone up 300% in the last year, and no-one can give us a decent reason why it's going up that much."

But while these latest suggestions are to be welcomed, there's no short-term help forthcoming.

The ideas have come from the Association of British Insurers in its contribution to a review being carried out by the Department for Work and Pensions.

The ABI's proposals are chiefly for employers' liability cover.

Diseases

They would focus on cutting the cost of claims by removing cover for industrial diseases, like asbestosis, from policies - that's been a huge problem.

The proposals include:

  • Businesses arranging their own cover for diseases through a new mutually-owned insurance company.
  • Claims being paid for by the insurer providing the current policy, rather than the one whose policy was in force when the disease started.
  • Lowering the legal costs involved with compensation claims, by allowing lawyers just a fee that's fixed in advance and by introducing no-fault compensation - where as long as the claim was straightforward, automatic payments would be made to the victims.

    John Parker, ABI
    John Parker: Lawyers too costly
    "Legal costs make up a large proportion of the total claims cost - about 40% - so we need to do something to improve that," says John Parker of the ABI.

    "But there are much more fundamental issues which are caused by the problem of occupational diseases, where there's a huge time lag between when someone is exposed to the disease and when it occurs, and those are extremely difficult for insurers to deal with."

    But small companies want help now - some of them to prevent their businesses going under.

    Shop around

    "Small businesses need a renwal notice three months in advance of any hike in their insurance premium so they can shop around," says Stephen Alambritis of the Federation of Small Businesses.

    "And there is a lot of money the goverment has got in from insurance premium tax and we want the insurance industry to talk about that to the government."

    Unfortunately, there's unlikely to be an immediate solution.

    The debate has some way still to go before we get any results from the Department for Work and Pensions' review.

    In the meantime, clubs and employers will have to fend for themselves as affordable cover becomes ever more difficult to find.

  •  WATCH/LISTEN
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    The BBC's Rob Pittam
    High premiums have forced some foundries to close
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