Why Have Employers’ Liability Insurance?
Employers’ liability insurance is a must-have for most businesses with staff as it is required by law. Not only does a business run the risk of a £2,500 fine for every day it is without cover, it is also in danger of having to find potentially millions of pounds in damages if a worker is injured or becomes ill as a result of the job they do.
Employers’ liability insurance is part of the UK’s safeguarding of workers and is also vital in keeping a business solvent should an incident occur. The law is there to ensure a worker or their family is fairly compensated for potentially life-altering injuries or illnesses. Otherwise, a business without insurance could file for bankruptcy and not pay what is justifiably owed. This doesn’t mean a business can neglect its health and safety responsibilities. The insurance company could sue an organisation doing so.
Employers’ liability insurance quotes are quite easy to come by, as this is one of the most common types of business insurance in the UK.
A few types of workers do not legally need to be covered by employers’ liability insurance, but often businesses choose to cover them anyway. The Health and Safety Executive found the cost of injury and ill health was £16.2 billion in 2018/19. Broken down, £5.6 billion of this was due to injury, while £10.6 billion was due to ill health.
What is more staggering was the average cost per case. The average costs were:
- £1.7 million per fatal injury,
- £8,800 per non-fatal injury,
- £19,000 per ill health case.
Is employers’ liability insurance the same as workers’ compensation?
Employers’ liability insurance and workers’ compensation are not the same types of cover. Workers’ compensation covers medical costs and a proportion of the salary or wages an employee has lost out on due to sustaining an injury or illness while working.
Workers’ compensation does not apply in the UK but is required by law in the United States and some European Union countries.
Instead, employers’ liability insurance is required by law in the UK. Businesses must have a minimum indemnity of £5 million, although often organisations choose to take out much more coverage, especially if working in industries with a higher risk of injury.
There is debate about whether workers’ compensation is a better system because it guarantees an income and prevents lengthy court battles. But employers’ liability settlements can be higher, and the UK also has a benefits system in place for injured employees unable to work under the industrial injuries compensation scheme.
Is employers’ liability the same as professional indemnity?
Employers’ liability is not the same as professional indemnity. While employers’ liability protects the physical wellbeing of staff, professional indemnity covers the work they actually carry out. Not all businesses need professional indemnity insurance, and it is not a legal requirement. But if they provide or sell a service, expertise or advice, they are wise to take out a policy.
Professional indemnity is where a business is held liable for a client or customer’s financial loss. For example, if work they did lead to the customer is losing money, be that because of poor advice, a brief not being met, or a mistake, the business could be sued. Professional indemnity insurance covers the legal costs and any damages awarded from a claim. It also covers the policy holder’s legal fees when defending against a bogus claim.
Mistakes do happen, and a business could cost a client money due to a number of reasons such as:
- Negligence either by poor advice or false statements.
- Sending a virus to a client.
- Losing documents.
- Dishonest staff.
- Accidental copyright breach.
- Accidentally sharing or purposefully leaking commercial or confidential information.
- Acts or omissions from subcontractors.
Not every business needs professional indemnity insurance, but some are required to by their industry body, such as architects and engineers. Those who give expert advice, handle sensitive data, carry out creative work where it could be claimed a brief has not been followed, or work for a client who insists on professional indemnity insurance are wise to look into cover.
These types of business include:
- Landscape architects
- Graphic designers and other designers
- Financial advisors
- IT specialists
- Healthcare professionals
- Planning and surveyors
- Risk management
- Design and construction
- Interior designers
- Coaching, training and education
- And more
How much is employers’ liability insurance UK?
Research by insurance experts NimbleFins found the average cost of a single employee starts at about £60 a year for an office employee. Hiscox, for example, have insurance starting at £4.67 a month – or £56.04 a year. But this is likely to be very basic and for the least risky type of job.
Employers’ liability insurance costs quite a lot compared to other business insurance products, but the cost per employee does reduce the more staff a business is covering. NimbleFins’ research found it cost about £213 for one trade worker in a small to medium-sized business. Meanwhile, two employees were about £354 (£177 each), and this rose to £753 for five employees (or an average of £150 per employee). The research looked at high and low-risk industries to find an average, so the reality may be slightly more or less depending on how dangerous the industry is and other factors.
The policy carries more risk to an insurance company than some other products. Still, the cost does also differ depending on the size and structure of the organisation (such as a sole trader or a public limited company) plus the type of work carried out. For example, an office-based company will be cheaper to insure than a construction company of the same size.
Industries with higher-than-average reports of workplace injury in 2019/20, and so likely to have higher premiums, were agriculture, forestry, fishing, construction, accommodation and food services, manufacturing and wholesale/retail trade, according to the HSE.
Meanwhile, those with higher-than-average illness among employees were public administration, defence, human health, social work, and education.