Plan Insurance Blog

SME’s Lacking Employers Liability Coverage by End of 2023

According to new research, by the end of the year over 160,000 SMEs and microbusinesses in the UK will be breaking UK law. The financial services review website Wise Money People found that these companies will fail to protect their staff by arranging suitable employers’ liability (EL) insurance.

The impact of successive economic hardships could be leading smaller companies to avoid their legal requirement to purchase vital business covers. Employer’s liability insurance is mandatory as employers are responsible for the health and safety of their employees in the workplace. The shocking statistic relates to firms with between one and nine employees. It includes both businesses that do not already have EL and will not purchase it, as well as those that do so but will stop doing so in 2023.

What Are The Consequences of Trading Without Employers Liability?

This significant number is reported despite the fact that all companies with employees are required by law to have EL insurance. Without EL protection, companies run the danger of incurring up to £2,500 in fines from the Health & Safety Executive (HSE) for each day they go without insurance, as well as possible legal action should an incident occur.

Should an accident occur, the business company is likely to face prosecution for not having appropriate insurance. It will also be liable for any potential compensation owed to the claimant, as well as its own and the injured party’s legal costs. Without insurance in place, these sums will need to be self-funded and could lead to the company becoming insolvent.

What Size Businesses Require EL Cover?

If you run a limited company that employs one or more people, or it has more than one director, the company is required to have employers’ liability insurance with a minimum cover level of £5 million. Even if your business is not a limited company but you do employ staff, then you need EL cover.  The only exemptions are companies with no employees or family businesses that only employ family members.

The study found that SMEs and microbusinesses were particularly at risk of not having EL insurance. Larger firms with between 10 and 250 employees were more knowledgeable about their responsibilities.

Plan Insurance can accommodate your Employers Liability Insurance needs. Just fill in our short call back form, and our professional brokers will be in contact to arrange your insurance.

Avoiding Employers’ Liability Cover is Not the Answer

Many companies with between one and nine employees are likely to either be unaware of their obligations when they hire staff or simply decide to ignore them in an effort to save money.

“A significant disparity exists between the need to arrange quality cover and the importance placed on securing the lowest price”

John Elliott Esq. Cert CII
Head of Commercial
Plan Insurance Broker

Our Head of Commercial Insurance, John Elliott, comments, “We’ve seen many, many times in the past that the person or department responsible for the insurance arrangements is, more often than not, tasked with getting cover in place at a reduced premium. This is something that is widely believed, to be a necessary tactic in order to keep Brokers & Insurers on their toes and ensure that premiums aren’t inflated. However, more often than not it leads to a hollowing out of cover. A significant disparity exists between the need to arrange quality cover and the importance placed on securing the lowest price.”

Yet, in the context of current market conditions and with the UK’s financial regulator mandating that companies ‘treat customers fairly’, value should already be at the forefront of any reputable brokers’ mind. It goes without saying that price is a constant consideration – but ensuring that our customers have the most appropriate insurance cover in place is without doubt our first priority. This means that the cheapest option isn’t always the best option.

Of course, those seeking out lower premiums aren’t doing anything wrong. Insurance is, for many, their second largest overhead. They may have immense pressure to reduce the impact on their company’s bottom line. It does however pose a higher risk of affecting the assets and reputation of the business in question because omitting the inclusion of certain clauses or agreeing too low a level of cover to have in place, can lead to far larger financial losses in the long run.

Given the nature of the current cost of living crisis within the U.K and the turmoil facing many Global economies, it is pragmatic to warn small businesses that during times of financial hardship, and often driven by claims management companies’ aggressive tactics, employees may be more likely to claim against their employer if they believe that it can lead to a monetary gain.

This not only has an immediate impact on the business itself, in the longer term it will also impact the rates charged by the insurance market. A potentially more damaging consequence could be a change to the way employees in the U.K view their companies’ EL coverage. It could end up being seen as a way of offsetting any imbalance in their own financial circumstances, potentially leading to a much higher claim rate more akin to those experienced by firms in North American territories.

In conclusion, it may well be that when faced with a combination of inflationary pressures hitting business margins and “the cost of living crisis” motivating more informed employees to pursue potential claim opportunities, an uplift in the frequency of claims results. This will could lead to greater exposure for companies whilst also generating higher premiums in the not-too-distant future.

Therefore it is vital to work with an insurance broker who will not only provide advice so that your business secures the most appropriate cover available, but will insist on thoroughly investigating every claim made against your firm. Plan Insurance Brokers are the partner of choice for our clients because we look at the bigger picture. We understand the need to save money whilst avoiding compromises on the protection of their assets, bottom line and reputation.

We retain an extremely high percentage of our customers’ year-on-year because we live by that mantra. We don’t simply use it as a ploy to win new clients. Instead we aim to be their trusted advisors for today, tomorrow and long into the future.

To find out how we can help you Plan ahead get in touch with our Team who will be more than happy to discuss your current arrangements confidentially.

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