Spare a thought for insurance

Until recently the majority of schools within the state sector have relied on the Local Education Authority to arrange their insurance.  Academies, however, are responsible for making their own insurance arrangements and converting academies must ensure they are insured from midnight of the date of their conversion.
    
Insurance can be a dry topic and the terms used often make insurance unnecessarily complicated. But get the insurance coverage wrong, and the consequences can be disastrous. In the last year alone, independent education insurance specialist EIS has dealt with a fire, a serious flood and numerous liability claims which in total equate to claims in the millions of pounds.

Procurement rules
Like all institutions accessing public funds academies must follow normal public procurement rules. If your total spend is over a certain limit (currently around £170,000 – including multi-year agreements) you must follow EU procurement directives; below this level and you must ensure the policy offers value for money. Your routes to obtaining insurance depend to a large extent on the experience you have in dealing with insurance and risk transfer. The options are: to engage the advice of one or more specialist insurance brokers, to ask for quotations from ‘direct’ insurers or to approach the Crescent Purchasing Consortium, a framework with a limited number of brokers and insurers on their panel.
    
There are approximately 3,500 insurance brokers authorised to transact business in the UK, and yet only around 10 have the requisite experience to deal with education business.  If you choose the broker option, firstly search the internet, ask other local schools or try the British Insurance Brokers ‘find a broker’ website (www.biba.org.uk). Don’t be afraid to ‘interview’ the broker or brokers you choose, and ask them specifically for examples of other schools they insure. You may even want to call some of these schools and check the broker’s credentials. Next find out whether that broker is tied to one insurer or whether a range of insurer’s quotations can be provided.  To ensure you have obtained value for money through competitive means, you should seek at least three quotations from insurers – brokers not tied to one insurer will be able to obtain such a range, others will not and in this case you will need to ask another broker to also provide a quotation.

Per pupil insurance costs
On 13 December 2012, the DFE announced a major change to the funding of insurance for academies starting from the 2013/14 academic year. Rather than a full reimbursement, every academy will be allocated £45 per pupil for insurance costs. When working with your broker or insurer, this figure does need to be kept at the forefront of your considerations.  Some will find it generous; others will find it leaves them with a serious shortfall in their budget, although the DFE has suggested for those with serious shortfalls additional funding may be made available.
    
Insurance costs can vary wildly, and in basic terms will be affected by: the number of claims you make, the risk management and security of the Academy, location, attitude to risk (ie. how much insurance you decide to buy and with what excess) and the quality of the presentation to the insurer. You may feel that claims are outside of your control, but it is no coincidence that academies with the most interest in risk management and proactively taking and implementing risk advice are often those with the very best claims experience, and it is worth bearing in mind that any money left over from the insurance settlement can be retained and spent by the school.

Debating the risks
Insurance is the transference of risk, and each Academy will have a slightly different view of the risks they are prepared to take and those they wish to purchase insurance to protect themselves from. When speaking with an insurance professional, you should be advised of the risks you face, and the availability of insurance to protect the academy from these risks.

Some risks are of course uninsurable, and others you will decide are so unlikely that money is better spent elsewhere, and some are compulsory. For both insured and uninsured risks as alluded to above it is also possible to reduce risk through good risk management and this should be as much a part of the broker’s role as the insurance itself.  
    
It is important to understand that whilst some ideas may cost you money in the short run, in the longer term the savings may far outweigh the costs. For example, particularly with inner city academies, many insurers prefer to see theft alarms installed, covering as much of the site as possible, with a dual path connection to a monitoring station and police response. Initial installation of the alarm can be in the thousands and many have ‘bells only’ alarms, ie. they do not connect through to a central receiving station. However, this connection can often be only a few hundred pounds and yet the discount an insurer can provide can be much more significant. This discount will be annual, whereas the initial cost of the alarm will be almost all only in the first year.  

Further considerations
Other good risk management advice will include checking the insurances of contractors who come on site, ensuring all those driving vehicles owned by the academy have their driving license checked and ensuring risk assessments are completed, in writing, for activities and areas of the site, which are reviewed on a regular basis. A Business Continuity Plan is also a must – what would happen if the academy became unusable on Monday morning, the day before an exam?  Would you have the right answers if the press became aware of the issue and arrived to ask what plans had been put in place? Strong and effective risk management, in conjunction with your insurance broker, will not only reduce your insurance premiums through discounting and a better claims history, but also aid the academies reputation and ensure management time is not spent dealing with avoidable problems.
    
The insurance programme itself is too complex to deal with in detail here, but in basic terms the policies can be divided into three subsets. Asset protection, from buildings and contents to money, business interruption costs and computers, and engineering cover for heating systems etc. Liabilities, for example public and employers’ liability (a legal requirement), professional indemnity and governors’ liability. Finally other policies such as motor, travel, personal accident and legal expenses. Keep in mind that the level of cover will hugely affect the premium you pay, and your programme should be bespoke to your requirements. For example, if you are having major theft of lead problems (as is so common these days), you may find that excluding these claims and paying for them yourself is actually cheaper than insuring them, as the insurer will ‘price in’ their belief that more claims will follow in the future.

Particularly when first setting up the academy you will be unsure of what policies attract what premiums and therefore do not be afraid to ask for various different quotations, for example high and low excesses and limits.

Keep up to date with changes
Finally, insurance is a product of the environment it is designed to protect you against. In other words, as the legal and political framework changes, insurance must keep up. Change in this day and age can be fast paced, and it is essential you use an advisor who can keep you abreast of the changes and ensure your insurance stays relevant. In the last few years the Bribery Act, Corporate Manslaughter Act and other legislation has all directly affected academies and insurance provisions as has case law. For example, a judge in a recent injury case regarding a young girl with life changing injuries has awarded up to £23m in compensation and care costs against the driver who negligently crashed into the car the girl was travelling in, killing her mother. This will have profound implications on the level of public liability insurance academies should purchase.
    
The purchase of insurance is not as simple as obtaining cover ‘off the shelf’ and indeed with some good advice and a proactive approach it is possible to save substantial money in the longer term whilst ensuring cover is actually wider than many standard policies allow. If your insurance professional is not providing advice not only in terms of a bespoke insurance programme, but also risk management assistance and legal and other relevant updates then you are not obtaining the full picture and it is worth looking around to see if you can obtain this assistance elsewhere.

Further information
www.eisinsurance.co.uk

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