Every business owner in the UK is governed by some regulation or other. For any business that employs staff, one of the most important regulations is actually a legal requirement as laid down in the Employers' Liability (Compulsory Insurance) Act 1969.
There are a couple of exemptions to the Act. These are most public organisations including government departments and agencies, local authorities, police authorities and nationalised industries and health service bodies, including National Health Service trusts, health authorities, primary care trusts and Scottish health boards.
The law effectively makes UK employers responsible for the health and safety of their staff whilst they are working. If an employee is injured at work, or a former employee develops a work-related disease, they may be entitled to file a claim for compensation. The Act requires UK employers to have a minimum level of insurance to cover such claims. For any level of business, the employer liability insurance cost is always going to be massively lower than any potential compensation claim, because as well as any eventual payout that may be awarded to the employee/former employee, there will also be legal fees.
There is obviously going to be an issue in cases where employees have developed an illness after leaving a certain employment. In order to regulate and trace employment histories to ensure the right party's insurance pays any compensation, there is the ELTO. The Employers Liability Tracing Office is a body devised by the UK Government and the insurance industry. Although not a legal requirement, there is a cross over with UK FSA (Financial Services Authority) compliance, so most UK insurers who underwrite employers' liability insurance have joined the scheme.
When a business takes out an employer's liability insurance policy, it is registered by the insurer with ELTO. This means that even if a claimant is a former employee, or the business no longer exists, the insurance company providing the original cover is able to meet its obligations to the claim. The information collected is of a general nature, and includes the company registration number and owner/directors details as held by Companies House.
With this in mind, and the facts of the 1969 Act, it is important that any business looking for employers' liability insurance buys it from an authorised insurer, i.e. one registered with the FSA, as per the terms of the Financial Services and Markets Act 2000.
The basic employers liability insurance cost a business pays provides cover of £5million, which is the minimum required by UK law, although the general level set by most insurers is £10million. For high-risk industries, increased cover is an option through an increased premium.
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