news & views - March 2003

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welcome to the latest edition of news & views
insurers react to worldwide terrorism threat 
news in brief
Zurich Municipal urges public sector to stay safe on roads
senior appointments boost capability
pressures on insurance market increases
Government call for development of 'risk standard' welcomed
need to know on all-weather pitches
workplace violence raises fears
single housing inspectorate established
review of employers' liability
sport is a dangerous game to play
insurance cover for flood risk
school arson hits record high
ALARM in action
customers welcome electronic data
tree deaths highlight need for inspection
unoccupied building are no empty threat
Legionalla outbreaks lead to insurance extension 
direct reporting to claims inspectors boosts efficiency 
 
back to current news & views 
 
welcome to the latest edition of news & views

Zurich Municipal celebrated its 10th Anniversary on 13 March 2003, and we are delighted to have achieved this significant landmark. The event is made even more poignant as it falls in the same month, and a hundred years after, Zurich Municipal's forebear company, Municipal Mutual Insurance (MMI) was founded.

Today we are in the enviable position as the leading insurance and risk management organisation serving the public sector. Our long heritage in this sector, combined with the hard work and dedication of every member of staff has allowed us to turn the company into a success story, and more importantly has enabled us to tailor our services to your needs.

In this issue, we have focused on the increasing regularity of adverse weather, and considered how this subsequently affects the costs of flood and storm damage. For the public sector, home owners and the insurance industry the effects are far reaching and there is a need to face-up with some urgency to the increasing threat to life and property that such changing weather patterns bring.

From an insurance perspective, the industry holds regular talks with the Government where we explain the likely effects of action or inaction on premiums. The evidence of the past few winters indicates that the policy of allowing building on floodplains will need to be reviewed as a matter of priority.

We have also drawn attention to the ABI Statement of Principles which have been issued with effect from 1 January 2003. The implementation of these principles will ensure that a competitive market for flood risks remains, whilst making certain that premiums and other contract terms reflect the actual level of flood risk that is present.

With the cost of flood and storm damage reaching a record high in 2002 it is also encouraging to report that the Government have committed to invest further in both flood defences and the implementation of improvements in the system of flood defence planning.

Pressures are growing from other quarters too and in this issue we return to the topics of arson prevention and the threat of international terrorism, both of which have been subject to a substantial amount of media coverage in recent weeks.

There is a growing concern surrounding the increase of deliberate firesetting in derelict buildings, and our article focuses on combating the problem by adopting a proactive risk management strategy. Vacant buildings represent an attractive location for vandals, and the costs attached to arson attacks in these premises are significant. Zurich Municipal is vigorously promoting the importance of assessing the risk, and taking the necessary precautions to reduce the likelihood of malicious fires occurring.

In conjunction with the above topic is the current trend of increasing costs of school arson claims in recent years. Zurich Municipal has been heavily involved in promoting risk management within schools, and following the publication of the Government's consultation paper on Fire Safety, we have been reinforcing our campaign for the installation of sprinkler systems in schools.

Terrorism poses quite different challenges, but public service providers will be expected to take a lead in the event of any major outrage and we bring to your attention again, advice from the Home Office on the subject.

There are significant implications for public service providers, which includes the alteration of Pool Re's status to that of a treaty reinsurer. This will result in the approach to terrorism policy cover altering going forward. There is also a real emphasis on implementing risk management measures designed to reduce the impact of any attack, with the added responsibility of reviewing and rehearsing emergency measures at regular intervals.

Finally, it is particularly pleasing to be able to report that Zurich Municipal Management Service (ZMMS) and the Zurich Municipal Claims Inspectorate have recently received BS EM ISO 9001:2000 external accreditation. This was achieved at the end of last year following a considerable amount of hard work and most importantly for customers, the accreditation provides international recognition of the quality of the service you receive from us.

We are always interested to hear your views on any of the items in News & Views. If you have any feedback please email info@zurichmunicipal.com or contact Paul Allen on 01252 387061. You can also visit our website www.zurichmunicipal.com

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insurers react to worldwide terrorism threat

The acts of worldwide terrorism over the past 18 months have caused personal tragedy for many people. At the same time they have led insurers to re-evaluate the potential magnitude of losses which may occur. Extensive discussions between insurers and the Government have resulted in changes in the way that reinsurance is operating.

Insurance cover for terrorism is arranged through a system known as Pool Re. From 1 January 2003 the status of Pool Re changed to that of a treaty reinsurer to other insurers. This means that insurers are now required to provide optional cover, backed by Pool Re (and ultimately the Government), for terrorism under their policies.

Previously, policies have provided limited terrorism cover (the heads of covers, such as £100,000 for general properties) for material damage (including contract works where applicable) and business interruption. From renewal in 2003 this automatic cover will be withdrawn from Zurich policies, in line with the approach adopted by other insurers. However, if terrorism cover is required from renewal in 2003, this will be available as an `add on' to existing policies on request, at an additional premium, subject to the following:

• cover will be on an `all risks' basis
• no selection of properties to be insured for terrorism is allowed, although policyholders may elect to arrange cover excluding housing properties and/or business interruption
• information about addresses and postcodes will be required in respect of larger properties.

Recent Government warnings have not been specific but they have consistently stated that the United Kingdom is at very real risk from a terrorist attack. Therefore insuring against acts of terrorism needs to be backed by vigorous risk management measures designed to reduce the impact of any attack. Prominent public buildings are particularly vulnerable and for this reason public service providers are advised to review and rehearse their emergency measures at regular intervals.

The public sector not only needs to protect its own staff and visitors, but in the event of an attack, the wider community will look to such bodies to take a lead. Moreover, quite apart from the overriding requirement to minimise the potential loss of life, there is another, financial reason for ensuring that every possible step is taken to minimise the risk of attack. The cap on Employment Liability and Public Liability limits of £5 million from the next renewal means that the financial exposure could be enormous.

As we highlighted in an article in News & Views last year, terrorism poses completely different dangers to fire or other civil emergencies. The USA and Bali attacks were indiscriminate and devastating. Unlike IRA bombing campaigns there is unlikely to be any kind of warning and the source and scale of the attack may be unprecedented. The fourth edition of the Home Office booklet, `Bombs, Protecting People and Property', with its appendix dealing with anthrax, offers guidance to managers on how to protect their premises. The booklet can be downloaded from the Home Office website.

It advises that a named person has responsibility for security co-ordination. Their tasks include the production of the risk assessment, the planning of defensive and protective measures, liaison with the emergency services, arranging staff training and communication cascades and drills.

Senior management should treat the threat of a terrorist attack quite differently from the threat of a fire. An almost military level of planning is required which includes preparation, rigorous staff training and plans for the aftermath. The public services would have specific additional functions to carry out in the aftermath of a terrorist attack which will have been detailed in emergency planning and civil defence procedures.

Therefore it is important that public service providers test their own security and evacuation plans rigorously and ensure that they meet the specific dangers of a terrorist threat. For example, evacuation measures which may seem logical and sensible for a fire, may place staff in even greater danger in the event of a terrorist attack.

Terrorists may well target several buildings within a complex. They may also target areas outside the building, deliberately designed to catch people who are assembling at what they mistakenly believe to be a safe distance. Assembly points should be much further away for a bomb evacuation than for a fire evacuation.

A bomb's detonating device may be triggered by the fire alarm and therefore an alternative evacuation routine, using communication cascades on a floor- by-floor basis, may need to be put in place. This is potentially a much more time consuming and unreliable system than using the fire alarm and therefore will need rehearsal and refinement if it is to work. If in doubt, take advice from security experts or the Police Crime Prevention Department.

One of the major difficulties for public service providers is that, by definition, they provide a service and therefore the public expects to have access to their buildings. This means that large numbers of people could be on the site at any given time. However, it is still important to control unauthorised access. Reduce the number of entrances to which the public can gain access, ensure they are well lit and if possible covered by CCTV. This is particularly difficult with buildings such as hospitals and universities which typically have numerous entrance points and many linked buildings with long walkways.

Staff in the post room and goods receiving bay will need specific instructions and training in dealing with suspected contaminated packages. Again this needs to be rehearsed regularly to make sure that they know what the procedures are and who they should notify.

The value of practicing emergency procedures cannot be over-emphasised. It will not matter how comprehensive the plan is if key staff do not understand their role. Regular drills dealing with the specifics of the aftermath of a terrorist attack are therefore as important as regular fire drills.

Finally, in addition to putting in place a comprehensive deterrence, prevention and detection plan, it is vital to consider a disaster recovery plan. This is now recognised as sensible risk management and for any large organisation such as a hospital, university or local authority is a fundamental part of its planning process.

The Zurich Municipal Disaster Recovery Plan is a guidance document that enables a public service organisation to understand and carry out the recovery process. It covers a range of areas such as loss of all, or part of, a premises. For further information please contact your local Business Team Consultant.

Vigilance has been the Government's key message on terrorism to the public at large. Large organisations should also concentrate on forward planning and staff training if they want to ensure that if the worst should happen, they are best placed to deal with the situation itself and the aftermath.

For further information please contact your local Business Team Consultant or email info@zurichmunicipal.com Guidance is also available on the Home Office and Health & Safety Executive websites. www.homeoffice.gov.uk www.hse.gov.uk

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Zurich sponsors Fulbright research awards

Zurich has joined forces with the world-famous Fulbright Commission to sponsor an international exchange programme providing four scholarships for postgraduate study in the USA.

The four Fulbright-Zurich awards are designed to attract individuals with commercial acumen wishing to undertake comparative research projects in the US in one of the following areas:

• business and diversity
• corporate social responsibility
• sports and society
• consumer trends or financial services.

For further information contact the Fulbright Commission on www.fulbright.co.uk

Zurich Municipal celebrate 10th birthday

Zurich Municipal celebrated its 10th birthday on March 13, 2003, marking its position as the leading insurance and risk management organisation serving the public sector.

The event comes exactly 100 years after Zurich Municipal's forebear company, Municipal Mutual Insurance (MMI), was founded.

The event was marked by a company conference, held in London.

fines for health and safety breaches rise by 40%

Fines for breaches of workplace health and safety have increased by nearly 40% in the last year and almost 900 companies, organisations and individuals were convicted of health and safety offences.

These latest figures have been published in the Health & Safety Executive's (HSE's) `Offences and Penalties Report' for 2001/2.

On average, fines were around £12,194 in the year up to March 2001/2 compared to the previous year's average of £8,790. The increase was largely due to more cases being handled by higher courts, where fines are unlimited. The overall total of fines rose £2 million from 2001 to around £10.9 million in 2002. Altogether, 1,064 prosecutions were brought by the HSE, with 84% resulting in a conviction.

These latest figures indicate that the courts are taking breaches of health and safety legislation at work seriously, and that poor working practices will not be tolerated.

firefighter's dispute

At the time of going to press, pay talks to resolve the firefighter's dispute were still taking place. We therefore draw your attention to the check-list and guidance notes on Zurich Municipal's website which will be helpful if further industrial action is called.

The documents cover such issues as, security measures against arson including installation of CCTV and controlling access to parts of public buildings; maintenance procedures to prevent accidental fires; staff awareness and training; and measures senior management should take in the first 90 minutes of a fire, including evacuation procedures. The checklist and guidance notes can be viewed on: www.zurichmunicipal.com

accreditation guarantees high standard

The consultancy arm of Zurich Municipal, ZMMS and the Claims Inspectorate have recently received BS EN ISO 9001:2000 external accreditation.

They were awarded this internationally recognised quality standard, which was approved by the United Kingdom Accreditation Agency, in 2002 following rigorous audits by National Quality Assurance. They will now be annualy audited to make sure standards are maintained and improved.

"We deal primarily with chief executives, heads of finance and other senior officers within the public sector. Achieving this independent verification provides them with reassurance of the high standard of service we offer which gives us a huge advantage over our competitors," said Mike Burke, Operations Manager at ZMMS.

"The accreditation is all about service delivery and builds upon the procedures we adopt which are documented in our quality system. In a best value culture it provides reassurance to our customers that ZMMS will guarantee a consistently high level of service throughout the country," he said.

Mick Bowles, Chief Claims Inspector said, "Accreditation provides independent verification that procedures for service delivery of investigation, negotiation, report writing and general correspondence etc. have been tested for quality and control. Importantly for our customers it means that they are provided with a verified quality service which contributes towards the management of the claims process."

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Zurich Municipal urges public sector to stay safe on roads

Review of vehicle selection practices, appraisals of driver scheduling and driver education on the causes of fatigue are amongst the measures which Zurich Municipal is urging the public sector to consider, as the estimated cost associated with a death on the roads reaches £1.3 million this year.

The risks for drivers and passengers increase during the winter with shorter daylight hours and adverse weather conditions. Employers, community transport and fleet operators have a responsibility to ensure all necessary safety measures are in place.

These include:

• a review of vehicle selection practices to ensure that vehicles are suitable for their intended use
• a review of driver scheduling and routings to allow sufficient time for regular breaks
• rigid enforcement of tachograph rules
• use of alternative means of transport
• education of drivers on the causes and solutions to fatigue.

Elaine Clark, Motor Centre Manager, Zurich Municipal said, "The indirect costs of loss of vehicles, business interruption and damage to brand image associated with a death on the road can be 20 times the direct cost of the accident.

"Research by Zurich shows that driver fatigue alone accounted for 30% of motor accident claims over the past five years, and the situation is getting worse with the increasing pressures of life and work. The cost to corporate reputation can be irreparable but it is the personal injury and loss of life that is unacceptable.

"The public sector has a duty of care to ensure that passengers and employees using their vehicles and transport services are safe at all times. Insurers and the public sector need to work closely together to promote risk management to fleet operators, community transport groups and anyone else who may be responsible for vehicle safety."

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Senior appointments boost capability

Zurich Municipal has made a number of key senior appointments.

Adrian Spencer has been appointed Claims Operations Manager, Alan Hunter, Technical Claims Manager, Elaine Clark, Motor Centre Manager and John Barrett, Education Manager.

Adrian Spencer joins Zurich Municipal with over 13 year's experience in the insurance industry, with a strong track record in projects, operations management and strategic planning. In his new role, Adrian manages Zurich Municipal's property and liability claims business and the network of regional claims offices.

Technical Claims Manager, Alan Hunter has 25 year's experience in the insurance claims field. Alan has worked with Zurich Municipal for the past nine year's and in his new role is responsible for ensuring that claims continue to be handled to a high technical standard. Alan also manages technical training within the claims department.

With over 20 year's experience in the insurance industry Elaine Clark has been involved in many changes within the motor claims industry. Elaine manages all aspects relating to motor claims ensuring that claims continue to be handled efficiently. In her new role she will be identifying and embedding changes in the claims handling process that will deliver benefits and improvements for customers.

John Barrett joins from MMA Insurance plc, where as UK Sales Manager he had responsibility for sales and business development. He will be responsible for a team dedicated to providing expert advice and support to universities, colleges and schools.

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pressures on insurance market increase

Pressures on the insurance market which we reported last year, such as the increasing frequency and cost of weather related incidents, the risk of global terror post- September 11 and the costs of `no-win, no-fee' litigation, have not receded.

Indeed, if anything, the pressures on the insurance market have increased. High winds or heavy rain now seem to be virtually monthly events while the rise in civil litigation; for instance claims for workplace stress, are spiralling upwards at an alarming rate. The rising cost of claims is an issue that all insurance companies view with increasing concern.

Last year saw an unprecedented increase in property claims. There were five separate serious weather related events during 2002. The January freeze was quickly followed by serious storm losses in February, July and August, and again in October and November 2002.

The insurance industry constantly monitors the situation and holds regular talks with the Government where we try to explain the likely effects of action or inaction on insurance premiums. The policy of building on floodplains and arson prevention measures are just two areas in which the insurance industry actively participate in informing public policy.

As a result Zurich Municipal, in common with others, expects to see a rise in premiums again this year. Clive Moulson, Zurich Municipal Director said, "The aim is to keep these to a minimum and Zurich Municipal will continue to do everything possible to help customers maintain their insurance cover at an affordable level."

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Government call for development of `risk standard' welcomed

The Government Strategy Unit's call for the development of a `risk standard' contained within their report 'Risk: Improving government's capability to handle risk and uncertainty', has been welcomed by Zurich Municipal.

The Government report believes that the development of a risk standard will help to ensure that best practice is shared amongst all those involved in service delivery.

The report also recognises that `some of the application of risk management techniques has been mechanistic and not integrated into decision making at the highest level', and calls for more effective leadership and culture change to address these weaknesses.

Commenting on the report, Guy Munnoch, Managing Director of Zurich Municipal said, "We welcome the Government's call for the development of a risk management standard to be used as the basis for accrediting partners' risk management arrangements, and to provide the basis for a common language for understanding and communicating risks.

"The authors of this report are right to highlight the increasing reliance on partnerships with other private, public and voluntary sector organisations to deliver public services, and the implications of this for risk management. Without a risk standard, there is always the danger that the grey areas created by increasingly diverse networks of accountability and liability for the delivery of public services will lead to risk being inadequately managed.

"The Prime Minister's own conclusion in his foreword to the report cannot be bettered," "Risk management ­ getting the right balance between innovation and change on the one hand, and avoidance of shocks and crises on the other ­ is now central to the business of good government."

For further information on the Government's Strategy Unit report visit www.risk-support.gov.uk

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need to know on all-weather pitches

The availability of lottery money under the youth sports initiative has led to a number of schools laying all-weather sports pitches.

However, many schools have not realised that their general insurance will not automatically cover the new pitches, or if they do, that many Local Education Authorities (LEAs) will have high excesses (£100,000 is not unusual).

Grants are available through the National Lottery for such pitches, which can cost around £100,000 and as much as £400,000 if floodlights and fencing are also included.

Zurich Municipal is willing to insure the pitches, provided they know about them and how much they cost. Therefore schools are asked to notify their LEA when a pitch is being laid and they in turn should notify their insurer.

There are particular issues surrounding all-weather playing surfaces from an insurance perspective. According to Zurich Municipal Local Authority Consultant, Sheridan Hodgson, there have been a number of cases of malicious damage, fire and even theft. Such is the value of the surface that thieves will go to the effort of cutting out sections and taking them away.

For this reason, schools are advised to ensure that pitches are adequately protected, if necessary by locked fences, lighting and security cameras. Enclosures should be appropriate to the location - in a rural area a 2 or 3 metre chain link fence with a lockable gate may be acceptable, but a brick wall topped with weld mesh or palisade fencing may be more appropriate for an urban area.

Another issue that should be considered is the vulnerability of such surfaces to water damage. Where a surface is inundated with water for an extended period of time it is possible for the top layer of the surface to `float' off the rest of the pitch. If laying such a pitch in an area prone to flood, the manufacturer or supplier's advice should be sought.

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workplace violence raises fears

Workplace violence is now one of the main fears among workers in all sectors, according to a recent Trades Union Congress (TUC) survey.

Overwork and stress are said to be the main health and safety concerns (55%), followed by repetitive strain injury (37%), display screen equipment (34%) and back strains (31%). However, this is the first year that violence has been ranked as one of the top five perceived workplace hazards.

Supporting this concern, recent research carried out among 5,000 workers in jobcentres and benefit offices revealed that 49% of staff had personally experienced violence at work in the last year. This figure increased to 76% (three- quarters) for staff who have constant contact with the public.

Occupations that deal directly with the public will inevitably be more vulnerable, and employers in these sectors should address this. While violence may be seen by some employers as an unpredictable risk, it should nevertheless be treated seriously and included in workplace risk assessments. As the Home Office's crime surveys continually show, fear of crime is widespread, and as corrosive on society as violent acts themselves.

Ian Gammans, Zurich Municipal Loss Control Manager commented, "The survey underlines the importance of proactive risk management within the workplace. Lone workers and those who come into direct contact with the public are particularly vulnerable and therefore every effort should be made to minimise the risks to these staff."

To help customers, the Zurich Municipal Lone Workers Report highlights those departments and employees most at risk. The report reviews current policies and procedures and checks to ensure that staff are following them. For further information email info@zurichmunicipal.com

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single housing inspectorate established

The merger of the two separate housing inspectorates for social housing into a single Housing Inspectorate located at the Audit Commission from April 2003, heralds a tighter inspecting regime for social housing providers.

The Government clearly sees the merger as a method of providing an enhanced role for the Housing Corporation, both as the statutory regulator for housing associations and as the key investment body. It has given the new single inspectorate responsibility for driving up standards of service to tenants of both local authorities and housing associations.

Previously the Audit Commission had responsibility for auditing local authority housing and the Housing Corporation for auditing housing associations. By placing the single inspectorate within the Audit Commission, a clear intention has been signalled that the Government wants to ensure that housing associations are financially sound, well governed and well managed.

Housing associations have some concerns about the new style of audit, which some see as encouraging a `tick-box' mentality. They will be awarded star ratings, with 3* being the highest measure. League tables are also to be introduced, similar to those already in operation for schools and the Comprehensive Performance Assessment (CPA) which ranks local authorities.

Whatever concerns there are over change, it is clear that the new inspection regime, and the Government's agenda to raise standards of corporate governance which underpins it, will present some real challenges.

"Housing associations will have to demonstrate that they are soundly managed. One way they can make certain that they are up to scratch is to ensure that rigorous risk management procedures are not only implemented but reviewed on a regular basis," said Mick Kelly, Zurich Municipal's Housing Manager.

Zurich Municipal offers several products to help housing providers meet their statutory duties. These include the Risk Hazard Analysis, which provides a systematic identification of hazards and risk severities and develops risk improvement action identified by the housing association. This is accomplished by compiling a team of in-house experts in their own field facilitated by a qualified Zurich Municipal Loss Control Specialist.

Zurich also offers a Safety Inspection Review, which is designed to help housing associations and registered social landlords (RSLs) identify potential hazards at an early stage and reduce the risk of accidents or incidents occurring.

Public housing providers are subject to a growing number of claims brought partly as a result of the changes contained in Lord Woolf 's Access to Justice Bill. Being able to demonstrate systematic procedures for inspecting, identifying and recording is a crucial plank in their defence.

Such operational risk management is generally well understood by housing associations. However the increasing emphasis on corporate governance will require a higher level of strategic risk management and it is this language and culture that RSLs, in common with other public service providers, will need to embrace.

"Across the whole public services sector there has been a huge drive towards improved governance. Housing associations will be expected to become more proficient in their management and organisation and one of the skills they will need is the ability to manage risk at a strategic level," said David Forster of Zurich Municipal Management Services (ZMMS).

ZMMS has worked with numerous public service providers to develop strategic risk management skills. This involves looking at a whole range of high-level risks, for instance those affected by external factors such as the economy, the political situation at local and national level, new legislation, partnerships and competition. The skills taught by ZMMS are easily transferred and once learnt, they become part of the strategic management armoury of senior personnel.

The aim is not only to understand the risks but also to identify potential business opportunities. RSLs who are able to demonstrate that they are soundly managed, with a firm grip on both the risks and opportunities, will be well placed to bid for government funding or take on additional responsibilities.

The Housing Corporation plays a key role in helping the Government deliver new housing development. Next year, the Corporation's Approved Development Programme will be £1.3 billion, including a £200 million Challenge Fund to provide new innovative affordable housing in London and the south east of England. One of the urgent issues is to increase the availability of housing for key public workers such as nurses, teachers and the police.

Housing associations may feel that they are entering an uncertain phase as the new inspection regime beds down. Much will depend on whether the inspection culture chooses to focus on the negative or accentuate the positive.

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review of employers' liability

The Government's decision to review the Employers' Liability Compulsory Insurance (ELCI) system has been welcomed by all stakeholders, including employers, Trades Unions and insurers, as an opportunity to address concerns that the current system has serious underlying faults.

The Department of Work and Pensions will lead the multi-departmental review, which will include an assessment of the scale and nature of problems faced in relation to ELCI.

Commenting on the review, Alan Woof, Zurich Municipal Underwriting Director said, "Zurich has been at the forefront of the current debate on employers' liability and we are therefore delighted that the Government has responded positively and so quickly to calls for a review of the workplace compensation system. We hope that the review will be carried out as quickly as possible and that the government will take into account the views and needs of all stakeholders."

There has been a growing call for a review of employers' liability by both employers and the insurance industry, fuelled by rising costs, limited rehabilitation opportunities for those involved in workplace accidents, the number of emerging latent diseases such as asbestosis and the rise in `no-win, no-fee' litigation. The Association of British Insurers (ABI) voiced the concern of many, including Zurich Municipal, when it argued the case for an overhaul of the system (News & Views November 2002).

At a conference last year on employers' liability, Geoff Riddell, Chief Executive Officer of Zurich's UK General Business Division, spoke about the flaws in the current system of workplace compensation. He said it was hard to defend a system in which 40% of compensation costs were accounted for by legal fees. "I believe that the Government does understand that the current system is unsustainable in the long term. They seem to appreciate that it does not place the needs of the victim at the fore and yet still doesn't provide good value for money for employers either. For these reasons, I believe they will be willing to commit time to identifying a better system."

Businesses, particularly smaller firms, saw the cost of employers' liability cover rise by as much as 400% last year, forcing some to carry on trading illegally without cover. A recent survey revealed some 210,000 small and medium-sized businesses are operating without employer's liability insurance.

The Government review will assess the case for reforming ELCI and if such a case is demonstrated, to identify the objectives and options for that reform.

The terms of reference for the review are:

• survey the operation of ELCI, taking into account any relevant aspects of the state benefits system
• assess the scale and nature of the current difficulties being experienced in relation to ELCI, in particular the extent to which these difficulties are likely to be short-term only, repeated in the future or permanent
• make recommendations to ministers as to the case or otherwise for reforming ELCI
• if a case for reform is found, make recommendations as to the objectives, principles and high-level options for such reform.

Commenting on the review, Minister for Work, Nick Brown, said, "The Government has been monitoring the operation of ELCI and has noted the need for a review. We will be working closely with all stakeholders on this review which will report to ministers in the Spring. We will continue to work closely with insurers, brokers and businesses to ease the existing pressures in the meantime."

Stakeholders will be asked to submit their written views to the review team as to the long- term commercial sustainability of ELCI; the economic efficiency of the operation of the present system; the impact of the current system on employers, including whether it provides an incentive for good health and safety management; and the extent to which the system meets the needs of affected employees and encourages their rehabilitation.

Further information on the review can be found on the Department for Work and Pensions website www.dwp.gov.uk

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sport is a dangerous game to play

The rise in the number of claims for sports injuries is leading to real concern that schools and local education authorities will curb the amount of competitive sport available to young people.

In many cases schools are withdrawing competitive team sports from the curriculum because of the perceived risks. The case of Smolden v Whitorth perhaps illustrates why. The case was brought following a collapsed rugby scrum which led to the claimant being confined to a wheelchair. The teacher who was refereeing the match was held to be responsible for failing to impose the rules rigidly and maintain control of the players.

The level of supervision by teaching staff, as well as their training and competence, are frequently the points at issue in cases which come to court. While safety is a paramount concern for all schools, local authorities and individual sport's governing bodies, it is less easy to be prescriptive over the level of supervision required for each game played or activity undertaken. It often hinges on what is reasonable, given the age and ability of the children taking part.

Even when there is adequate supervision and umpiring, defendants can still lose in court. In the case of Hawkins v British Colleges Sport, the claimant was struck by an attacker's hockey stick when attempting to block her shot from a penalty corner. Although it was held that the match was adequately umpired and the attacker was playing within the rules, the judge commented that defenders should be properly instructed in the correct and safest technique for going in to tackle.

The risks of accidents are reduced where sports and outdoor activities are well supervised by sufficient numbers of qualified teachers or instructors trained to instil safety as well as teach the sport itself. Much less easy to pre-empt are the accidents which occur during unsupervised play at lunchtime and breaks. A recent case illustrates the dilemma for a school - how much supervision is reasonable?

Kearn-Price v Kent County Council, hinged on the duty of a school to supervise its pupils before the start of classes in the morning. The 14-year- old claimant arrived at school 15 minutes before school opened for registration and during that period was struck in the eye by a full-size leather football, resulting in the loss of all useful vision in his left eye. The school was sued for negligence.

The Recorder who heard the case found in his favour and the decision was upheld at the Court of Appeal. There had been a history of rather more minor incidents with footballs in the playground and at the time of the accident, the use of full size footballs had been banned. The judge found on the evidence that occasionally a full-size ball was confiscated and once or twice a year pupils were reminded in assembly that full size leather footballs were not permitted in the playground. The judge found that pupils regularly ignored that ban and their actions were not sufficiently discouraged by disciplinary measures.

Although there were teachers in school preparing for the day's lessons, none were patrolling the playground. The court rejected the argument that there was no duty to supervise pupils prior to the start of the school day. They found that it was inevitable and entirely reasonable that pupils will wish to arrive at school sometime before school hours commence. It may be that it is not reasonable to expect a school to do as much to protect its pupils from injury outside school hours as during school hours. All will depend on the circumstances.

Zurich Municipal has developed a modular- based course for head teachers and senior staff designed to raise awareness of liability issues that schools face. These include school trips, bullying, sports and leisure, control of contractors, failure to educate and transportation. The sports and leisure module will feature sports injuries. The course is workshop-based and can be delivered via the Local Education Authority (LEA) who invite attendance from individual schools.

Assessing the risk prior to the activity taking place, adequate supervision by trained teachers and firm discipline are the key factors in reducing the risk of accident. The only alternative will be to drop sport or outside activities altogether. Such a course of action would lead to a raft of new problems. Ironically, concern over the growth of obesity in young children has led to a proposal to extend the school day by two hours in order to enable outside activities such as sport to take place. Such a scheme will be piloted in five secondary schools in Brent, north London, for three years, starting next autumn, to see if it achieves its aims of making pupils healthier, reducing youth crime, producing better exam results and cutting the rising levels of misbehaviour, truancy and exclusion.

The scheme has the backing of Downing Street which believes overhauling the school day may be necessary to banish the `couch-potato culture', which has turned British school children into the unhealthiest younger generation in recent history. If implemented nationwide, the new school day would also cut the £260 billion cost of childcare, reduce the number of `latch-key kids' at home alone until their parents return from work and enable more parents, especially mothers, to go back to work as children would be supervised until teatime from the age of eleven.

For further information on the Zurich Municipal course for teachers please email info@zurichmunicipal.com

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insurance cover for flood risk

Flood and storm damage in 2002 cost the public sector 50% more than in 2001, new figures released by Zurich Municipal revealed, reaching a record high of £22.5 million, almost four times the average annual cost in the last decade.

Despite these soaring costs, there is good news for small homes and businesses in areas at risk of flooding, they will now be able to secure flood insurance, the Association of British Insurers (ABI) has confirmed. The decision was taken by the industry after the Government confirmed that it will invest in more and better flood defences.

The ABI has announced a Statement of Principles which sets out a basic approach for member companies providing flood insurance. It will ensure that there is a competitive market for insurance based on the actual risks of flooding. The principles came into effect on 1 January 2003 and will replace the current temporary agreement that was created by the industry following the floods of Autumn 2000.

The Statement of Principles has five objectives:

• full access to a competitive market for insurance for the vast majority of homeowners and small businesses
• improved security for those who live and work in high-risk areas
• new provisions for those who wish to sell their homes or businesses
• better use of new solutions to make properties insurable, even in high- risk areas where improvements to flood defences are not planned
• a clear incentive for government and local authorities to continue to invest in flood defences.

Around one in ten of the UK's 20 million homes and businesses are situated in the floodplain. About three-quarters of these are protected against the risk of flooding at or above the Government's own minimum standards. ABI members will continue to make flood cover available for them as a standard feature of household and small business policies. Premiums and other contract terms will reflect the different levels of flood risk, as they do for other factors such as crime.

The new Statement of Principles will also benefit policyholders who face higher risks of flooding but are not protected to the Government's minimum standards. Where improvements in flood defences sufficient to meet the Government's standards are scheduled for completion by 2007, insurers will maintain flood cover for homes and small businesses which they already insure. Going beyond the terms of the existing two-year agreement, insurers will also make special efforts to maintain cover for properties when they are sold, subject to satisfactory information about the new owners and proposed use of the premises.

Where improvements in flood defences are not planned, insurers will `examine the risks on a case-by-case basis and use their best efforts to continue to provide cover'. The Statement of Principles commits insurers to work with policyholders where necessary to see if action can be taken to make the property insurable. This might include the use of accredited flood protection products and temporary defences.

Commenting on the announcement Mary Francis, ABI Director General, said, "This country is fortunate to have a well-established system of flood insurance. Very few other countries enjoy anything like this degree of protection, as recent experience in Central Europe has so graphically illustrated.

"We warmly welcome the Government's plans to increase spending on flood defences, and to make other improvements in flood risk management.

"It is now important for our customers and the industry that promises are turned into action. The faster the plans are implemented, the greater the benefit for all."

The Government has given commitments to implement a number of policies on flood risk including a commitment to spending on flood defences and the implementation of improvements in the system of flood defence planning set out by the Department of Environment, Food and Rural Affairs (DEFRA).

In addition the Environment Agency's flood asset database will be made available to insurers this year. There will also be improvements to the flood warning system and the implementation of the Cabinet Offices emergency planning review.

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school arson hits record high

New figures from Zurich Municipal reveal that the cost of school fires in 2002 hit a record high of £96.6 million, more than double the cost of four years ago.

Zurich Municipal estimate that 90% of their school fire claims are as a result of arson attacks. This unprecedented statistic, accompanied by a new regional breakdown showing an alarming number of claims for arson, has driven Zurich Municipal to step-up its campaign to make sprinklers compulsory in all new or refurbished schools.

On the basis of its own experience, Zurich Municipal reveals that a disproportionate part of the cost of school fires is hitting the Midlands and Scotland:

• Midlands 43%
• Scotland 34%
• North West 13%
• South East 5%
• South West and Wales 4%
• North 2%.

Zurich Municipal is liaising with the Government following the publication of its consultation paper on fire safety. Welcoming the emphasis the paper gives to risk assessment and the guidance on how to minimise the risk of fire, Zurich Municipal stresses that installing sprinklers in schools would save money by cutting down on the financial and social costs of school fires.

Larry Stokes, Underwriting Manager at Zurich Municipal and chair of the Arson Prevention Bureau's Schools Working Group, said, "These statistics will be a big disappointment for the Government in their drive to reduce the cost of arson. The figures make a compelling argument for the installation of sprinklers, with losses from schools in buildings protected by sprinklers estimated to be only one tenth of those in unprotected buildings. They have already proved their value in a number of schools.

"The boom in school building and the publication of the Government's consultation paper provide the perfect opportunity to improve the design of school buildings. It makes sound financial sense to introduce measures at the design stage - a relatively small investment in sprinklers will save both money and lives in the future."

In a further bid to combat arson, the Government- sponsored Arson Control Forum (ACF) has launched a website which gives a round-up of all the latest information on arson prevention. The ACF is a multi-agency partnership set up last year to reduce incidents of arson by nearly a third by 2009. Intended as a one-stop-shop, the website will help police, fire officers and other stakeholders keep up-to-date with news and developments in the fight against deliberate firesetting. They can also share experiences or get their questions answered via a special email address.

Arson fires in England and Wales cost £2.1 billion a year. In the last ten years, there have been around 1.8 million arson fires, resulting in 22,000 injuries and 1,100 deaths.

The Arson Control Forum website can be accessed on www.arsoncontrolforum.gov.uk

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ALARM in action

by Sheila Boyce, Chief Executive of ALARM

Risk knows no national boundaries so therefore every effort to formulate international risk management frameworks and global competencies must be embraced positively.

The new Risk Management Standard which was jointly formulated by ALARM, the Institute of Risk Management and the Association of Insurance and Risk Managers, has therefore been welcomed as a positive step towards formulating a risk management framework, as well as providing an excellent example of how partnership working can produce positive and successful outcomes.

There is no doubt that a unified approach to risk management across public, private and voluntary sectors has the potential to significantly reduce ambiguity and inefficiencies.

Such a broad-based spirit of co-operation was evident at a recent conference organised by the Association of Risk and Insurance Managers of Australasia (ARIMA), which I attended with ALARM Treasurer, Bob Cope.

ALARM and ARIMA have forged close links over the years and share the common goal of developing and implementing successful risk management practise. Our visit provided an excellent opportunity for both organisations to exchange information, pool knowledge and explore opportunities to work more closely together in the promotion of risk management.

A major concern for all engaged in risk management has been the surge in inventive and high-volume litigation. For public service providers this global trend is potentially highly damaging on numerous fronts. Not only are scarce public resources deflected from front-line service delivery, but also fear of litigation has a negative and demoralising effect on those who work to provide those services.

Robust risk management is now understood and recognised as a vital weapon in reducing the opportunity for successful litigation, but it is a constant battle and risk management efforts alone will not stem the tide. ALARM, in common with others in the public sector and insurers, would like to see a more even-handed approach to the current campaign for `access to justice' which seems unrelentingly biased to the alleged victim rather than the wider public good.

At present there seems to be little recognition of the real cost and destructive impact of Conditional Fee Arrangements (CFAs) and the likely effects of the proposed extension of NHS recovery of charges on the delivery of essential front-line public services.

Clearly, risk management practitioners constantly need to keep one step ahead of the trends, particularly in relation to litigation. This means that training must be focused and relevant to changing needs. During 2003 ALARM has a range of training and education events planned to address member needs. Please also note that the ALARM conference this year will be held at The Conference Centre, Manchester on 23-25 June.

about ALARM

The national forum for risk management in the public sector represents over 1,300 members across the UK public sector. Sheila Boyce can be contacted on 01494 459166 or email ch.exec@alarm-uk.com

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customers welcome electronic data

Regular meetings to look at ways of developing the electronic transfer of data between customers and Zurich Municipal, particularly via the website, indicate that customers generally welcome this development.

To facilitate the process, Zurich Municipal will be inviting more customers to attend `Data Exchange' meetings around the country where electronic services and the provision of data are explored.

The website is the primary vehicle for data exchange. It meets the key aims of reducing the flow of paper, saving time and providing information in a format which is easy to use and quick to view. Secure passwords ensure that access is only available for those with security clearance.

Milestone Management is indicative of the direction that Zurich Municipal is taking in order to embrace e-government. The electronic service has now been running for over a year and enables members to track the progress of claims, monitor total loss exposure and identify if there are any outstanding claims.

The aim is to make Milestone Management available to many more customers and to enhance the level of information available in this format, via the website.

Monthly claims data reports are a key part of the process of sharing data with customers. Previously these have only been available in paper format but Zurich Municipal can now provide the service electronically via the members' area of the website. The files contain high-level claims information which the customer can open up with MS Excel, MS Access, Lotus 123 etc. The file contains names, references, dates and financial data.

For further information please contact your local Business Team Consultant.

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tree deaths highlight need for inspection

The deaths of three people who were crushed by a falling tree have highlighted the danger posed by trees on the public highway and the need for rigorous systems of inspection and maintenance.

In this particular case the authority was fined £150,000 for breaching health and safety laws and ordered to pay £56,000 costs. The three died when a 15-tonne ash tree fell in high winds onto two cars.

The court was told that the tree displayed signs of fungal growth and tests carried out after the tree had fallen showed that 90% of the roots had rotted away. Following the fatal accident an immediate assessment of all highway trees within the authority's jurisdiction was ordered.

Around the country recent winters with high winds and heavy rain have left a number of trees particularly vulnerable. Tree root incursion can have a significant impact on public liability claims statistics and yet this is an area often ignored by risk managers. Zurich Municipal advises that organisations should have a tree management policy with written procedures, inspection and maintenance schedules and reporting procedures.

The Zurich Municipal Tree Root Survey looks in detail at current policy and procedures, tree types, foundations and weather. A report is produced detailing the number and cost of claims, with comment on tree management policy and procedures, along with inspection and record keeping.

The report will include recommendations on tree management, remedial measures such as pollarding, felling and root barriers and these will be supported by cost effective loss control measures which will enable the management of the risk to be better controlled. For further information, please email info@zurichmunicipal.com

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unoccupied buildings are no empty threat

An empty building can act like a magnet. Youngsters treat it like an adventure playground, the homeless treat it like an empty hotel and vandals will simply abuse it.

The risk of a fire in empty buildings is a significant one and losses can be huge. Such is the Government's concern over the growing menace of deliberate firesetting in vulnerable derelict buildings, that the Office of the Deputy Prime Minister has published the first- ever round up of advice and information on the powers currently available to councils, police and fire brigades to tackle the arson threat.

The circular includes examples of some of the initiatives being funded by the Government- sponsored Arson Control Forum demonstrating how authorities can work together with private sector partners to reduce risk.

The anti-arson schemes featured include:

• rapid response on fire hazard issues like boarding up empty property or cutting off gas or electricity supplies
• zero tolerance campaigns on indiscriminate disposal of household rubbish
• intensive, locally targeted fire safety publicity campaigns in those areas where serious, rubbish-related fires have occurred.

Quite apart from the danger to the surrounding area, there are considerable risks to those whose job it is to fight fires. Just before the fire fighters first two-day stoppage in November 2002, a fireman was killed in a fire in an empty building in Leicestershire. Several of the fires attended by the Armed Forces in their Green Goddess fire engines during the strike, were in empty buildings.

The latest figures show that in 2000 there were 10,700 fires in empty, unsecured properties in the UK while incidents involving waste materials are running at almost 150,000 a year. Statistics published by the Fire Prevention Engineers said that in the same period, there were six serious fires (those over £250,000) in unoccupied buildings with a total damage of almost £1 million. All these were started deliberately.

Arson is of continuing concern to both insurers and property owners, the general risks and the huge cost to the economy have been widely covered in previous issues of News & Views. However, there are specific issues that need to be addressed in relation to empty buildings. Simply padlocking a building and forgetting about it is not an option.

An empty building is still a valuable asset and unattended it is particularly vulnerable to fire, malicious damage, burst pipes and unauthorised occupation. The owner also has liabilities and responsibilities under occupier's liability because even unauthorised intruders and vandals have protection within the law.

It should be noted that there are specific exclusions for buildings unoccupied for more than 30 consecutive days for riot, civil commotion and malicious damage, escape of water from any tank apparatus or pipe, or from accidental escape of water from an automatic sprinkler installation.

The owner is expected to notify their insurer when a building becomes empty. They should also turn off all services (except fire and intruder alarms), drain water systems (or maintain them at a minimum of 5 C), inspect internally and externally, remove waste materials, seal-up letter boxes and secure buildings against intrusion.

According to Graham Page, Zurich Municipal Senior Loss Control Surveyor, a large number of owners do not comply with many of these requirements, particularly to notify the insurer.

Fire presents perhaps the greatest single hazard to surrounding properties and people. It is important to remove all combustible contents and waste and flammable liquids and bottled gas. Fly-tipping at empty premises can also present a hazard because such material is frequently highly combustible.

It is also important to discourage theft from an empty building by removing all valuable fixtures and fittings.

"Old buildings frequently contain quite desirable items, such as old fireplaces which are attractive to thieves looking to sell them on, or expensive metalwork which can be melted down," said Graham Page.

Having carried out a basic close-down routine, it is still important to carry out regular checks both inside and out. The building could look totally secure from the outside, but inside a pipe may have burst, or a family of squatters may be comfortably settling in for the winter.

The Government circular can be viewed on www.safety.odpm.gov.uk

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Legionella outbreaks lead to insurance extension

The insurance industry in the UK applies a standard wording which excludes gradual pollution claims from public liability policies. This exclusion would apply to outbreaks of legionella ­ which usually build up over a period of time and require incubation before they can become a hazard to human health. This industry standard exclusion applies to Zurich Municipal's policies, as Alan Woof, Underwriting Director explains.

Recent outbreaks of legionella such as in Barrow- in-Furness and Sandwell have caused us to review the breadth of cover we make available to our customers. In order to offer customers a wider choice of cover, and after detailed discussions with our reinsurers, Zurich Municipal is now able to offer a buy-back option under our Public Liability policies, which reinstates the cover provided there in respect of claims arising from legionella outbreaks.

Zurich Municipal is also urging customers to review their risk management measures relating to legionella. The primary reason is, of course, to reduce the chance of an outbreak in the first place. However, if there is an outbreak, any organisation will need to be able to demonstrate that it had adequate procedures in place to protect the public if it is to avoid liability claims. The Health & Safety Executive revised its approved Code of Practice and guidance document (L8) concerning the risk from exposure to legionella bacteria in January 2001. The Code of Practice consolidates the previous documents concerned with the risk of legionella; the main changes are on guidance about the duties of suppliers and the requirements for getting advice. The code also gives practical advice on the requirements of the various acts and regulations related to legionella.

The first part of the code advises on:

• identifying and assessing the risk of legionella infection
• managing the risk, specifically training and competence
• preventing or controlling the risk from the exposure to legionella bacteria
• record keeping
• the responsibilities of manufacturers, importers, suppliers and installers.

Part two provides guidance on the control of legionella in water systems and includes sections on:

• cooling systems
• management of cooling towers
• treatment programmes
• typical on-site monitoring checks
• cleaning and disinfection
• hot and cold water services
• design and construction of water systems
• treatment and control programmes.

The L8 code is available from HSE Books (ISBN 0 7176 1772 6). Any customers wishing to discuss suitable risk management measures or to arrange a buy-back to secure cover for legionella should contact info@zurichmunicipal.com

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direct reporting to claims inspectors boosts efficiency

Any steps to reduce the time taken to process claims will help limit the costs involved, so a pilot scheme involving the direct reporting by customers to claims inspectors, has been welcomed by those trialling the process.

The new service enables customers to notify the claims inspector directly of a claim involving minors' or employers' liability at the same time as they notify a claims handler. Prior to this the claims handler would normally take the decision to notify the claims inspector. The new scheme should speed up the process.

A five-month pilot with the Unitary, Luton Borough Council and Bristol City Council has saved time on the decision-making process, averaging a minimum of 10 days per case.

Explaining the rationale behind direct reporting, Mick Bowles, Chief Claims Inspector said, "The average cost of claims is increasing. Whilst it is very difficult to reduce the value of a claim, steps can be taken to tackle costs which build on a daily basis. If we can make decisions on claims earlier we can look to cap third-parties' costs."

Early reporting also fits comfortably within the stricter civil procedure rules which are designed to reduce legal delays. Protocols for civil cases set time limits for various stages of a case, including the exchange of documentation between parties. Any delays in dealing with a claim can be costly. "Anything we can do to accelerate the decision- making process on liability will help," said Mick Bowles.

It will also make it easier to argue for a curtailment of success fees in `no-win, no-fee' cases when liability is admitted within the three-month protocol period. The recent test case of Halloran v Delaney demonstrated that it is possible to obtain a reduction in success fees where liability is admitted at an early stage.

There are other sound reasons for investigating claims early. Documents are more readily available and the circumstances of an incident will be fresher in the minds of witnesses.

Eileen Reid, Risk Manager of Luton Borough Council, feels that there are real advantages to having direct contact with an inspector. "Managers and head teachers find talking through the issues face-to-face with an inspector much less intimidating than the process of filling in a claims form. More significantly, they often reveal key facts that wouldn't always be included on a claim form," she said.

Commenting on the success of the pilot, Dave Mikkelson, Principal Insurance Services Officer at Bristol City Council said, "The pilot sits nicely with the Council's claims handling strategy. We believe it essential to take the initiative away from plaintiff 's solicitors. Dealing with claims quickly and robustly often deters solicitors from taking further action and this has been reflected in the reduction in the number of claims received during the current period of insurance."

The system will be used in general for cases involving employment liability and those where minors are involved, as they would automatically be investigated by claims inspectors.

Zurich Municipal is looking to roll-out the scheme around the country. Interested customers should discuss it with their Claims Bureau Manager, Claims Inspector or local Business Team Consultant.

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