Insurance in Education

Transcription

1 Insurance in Education In association with

2 Contents p3 William Simmonds p4-6 Understanding your establishment s insurance needs p6-7 Insurance requirements for all education establishments p8 Who and where to get your insurance from p9-10 Getting your insurance specifications correct p11-14 Checking the small print p15 Funding Academies for Insurance 2013/14 Designed & Printed by Neil Terry Printing,

3 William Simmonds Insurance is a very difficult subject for many to fully understand and in education there are many risks to cover. We are issuing this NASBM guide as part of our on-going series of guides, and I must thank The Education Broker for their huge input into this publication. The guide will assist you to identify the risks you need to cover and the levels of cover required. It will inform you of the policies which are mandatory and those which a school really should have in place. It will also make recommendations, such as checking the Small Print. If you are an Academy you will receive per-pupil funding as part of your general annual grant (GAG) plus a further grant of 20 per pupil, as insurance for Academies generally costs more. I recommend this guide to you. It will inform you; it will advise you and will become a reference booklet that you will constantly refer to. William Simmonds FRSA Hon FCoT Chief Executive 3

4 Understanding your establishment s insurance needs Each School or Academy has its own particular profile in terms of insurance risk and cover requirements. Consequently an insurance programme should be tailored to those needs and consultation with a specialist broker with demonstrable experience in the education sector is highly advisable. The following insurance covers are a summary of the main requirements; Property Insurance This concerns damage to buildings and loss or damage to contents by Fire, Lightning, Explosion, Storm, Flood, Escape of Water, Subsidence, Theft, Vandalism and Accidental loss or damage. Terrorism can also be included. courts and other sporting surfaces. Contents includes furniture, teaching equipment, audio, video and IT equipment including computers. Business Interruption Covering; financial loss as a consequence of damage suffered under the Property Insurance section - loss of revenue and/or the additional cost of working e.g. hiring in temporary buildings, catering facilities, equipment. An indemnity period (the time from the date of the loss until the school is back up and running) is selected, typically 24 to 36 months but will depend upon the construction of the property and any specialist equipment. Money Covering; loss of money including theft from the premises and within geographical limits stated in the policy. Monetary limits are chosen by the school. It is common that a Personal Assault extension is included to protect against a member of staff sustaining injury while on school premises or whilst carrying cash to/from the bank. Buildings includes all of the premises, outbuildings, fixtures and fittings, walls, gates, fences, yards, car parks, swimming pools, tennis 4 Computer Covering; loss or damage to computers and ancillary equipment. Breakdown cover may also be included. Computer equipment may also be covered under Property Insurance but specific cover is generally more comprehensive.

5 Employers Liability Covering; liability for claims made against you by employees for injury or illness suffered during the course of their employment, where you have been negligent. The statutory legal requirement is a limit of indemnity of 10,000,000. It is important that you estimate the accumulation of risk. Limits of Indemnity can be provided up to and in excess of 50,000,000 (if required). Schools typically purchase 25,000,000. Public Liability Covering; liability for claims against you by third parties (not employees) for their property damage, illness, or injury, where you have been negligent. This cover also usually includes Products and Hirers liability. Additional extensions may also cover Libel and slander, abuse, Data Protection and Defective Premises Acts. Limits of Indemnity can be provided up to and in excess of 50,000,000 (if required). Schools typically purchase 25,000,000. This section of cover can also include Professional Indemnity Insurance, which in a School environment usually relates to claims for failure to educate, however some schools may derive additional income from the provision of advice through teaching aids or services and in doing so could attract claims due to errors or omissions for which Professional Indemnity insurance is required. Normal limits of indemnity range between 1,000,000 and 5,000,000. Governors Liability Covering; the liability of a Governor/Officer/Trustee of the School/Academy for costs, expenses and damages for any wrongful acts committed or allegedly committed by them in the course of their role as a governor. A typical limit of Indemnity would be 2,000,000 to 5,000,000. Personal Accident and Travel Insurance Covering; pupils and employees on official school duties and activities, including whilst on organised school trips in both UK and abroad. Policy benefits vary. Fidelity Guarantee Covering; fraud, or theft of money, or property by a member of staff. Typical cover limits are 250,000 but higher limits are available. Motor Insurance Covering; schools vehicles which legally require minimum third party injury and third party property damage insurance. This excludes employees vehicles. Occasional Business Use Covering; staff members own vehicles for occasional business use where the staff member s own motor insurance does not provide business use cover. Engineering Insurance & Statutory Inspection Covering; damage to plant e.g. boilers, fume cupboards, lifts, hoists, pressure vessels, etc. Engineering Inspection is a statutory requirement on many items of plant. 5

6 Legal Expenses Insurance Covering; the cost of defending claims. These covers include employment disputes, property disputes, contract disputes and VAT and tax investigations. Legal helplines are normally also included. Typical limits are 100,000 per event with an overriding annual limit of 1,000,000. Staff Absence Insurance (sometimes known as supply teacher insurance) Covering: schools against financial losses incurred as a result of staff absence. Schools insure selected staff categories for absence as a result of illness, accident or injury. Policies may also cover absence as a result of other causes e.g. Jury Service, Maternity Leave and Staff Suspension. Schools can usually select the categories of staff they wish to insure, the excess period applied to each staff category and the daily benefit payable for each day of qualifying absence. Schools receive a benefit payment from the insurer for each day of qualifying absence, once the excess period has elapsed. Qualifying absences are determined by the cover and cover limitations as defined in the terms of the insurer s full policy wording. Insurance requirements for all education establishments Mandatory Insurance There are certain insurances that are compulsory for a School/Academy in addition to those it would be ill advised to operate without. The compulsory insurances are; Employers Liability Insurance - a minimum limit of indemnity of 10,000,000 is required by statute Motor Insurance - the legal requirement is that any vehicle that is registered for use on a Public Highway must be insured, as a minimum, against third party injury and against damage to third party property 6 Engineering Inspection Insurance - many items of plant and machinery have a statutory inspection requirement. The frequency of inspection will vary dependent upon the item. Most schools, if not all, will have items falling into a category with a statutory requirement for inspection.

7 Non Mandatory Insurance Requirements for all Education Establishments We have detailed the range of Insurance covers that you should consider, in addition to the compulsory requirements earlier in this guide. Importantly, the broker will carry Professional Indemnity Insurance and so you have an added level of protection in relation to any incorrect advice, errors or omissions pertinent to your insurance programme. Whilst the School/Academy has ultimate responsibility to decide on the levels of cover they wish to buy, and the limits of indemnity they feel comfortable with, it is highly recommended that the establishment engage the services of a professional Insurance Broker. It is also important when deciding on whom to consult that they have experience in the education sector, specifically in respect of the type of insurance you are looking to procure. We recommend that you ask for a reference from another School/Academy for whom the broker has recently acted. The experienced broker will be in a position to guide you on the covers you should put in place and help you to avoid buying cover that you do not need. This will typically include guidance on the sums insured and limits of indemnity that you should consider. They may be in the favourable position to be able to offer you a comparison between different insurance companies products, premiums, terms and conditions - which could also save you valuable time. When considering the level of insurance required by your School/Academy you should assess what the impact of not transferring the risk would be should an incident occur. In most cases when you forecast what the impact of not having cover in place would be then you are likely to opt for insurance, however you may feel you can manage part of the risk yourselves in the form of an increased deductible for example. For those risks/partial that you choose not to insure it will be imperative that you have a specific and robust risk management process in place in order to minimise exposure. This will usually form part of your overall risk management procedure. 7

8 Who and where to get your insurance from Local Authorities Historically, many educational establishments have enjoyed insurance protection via their Local Authority, and many still enjoy this luxury. One of the advantages of this arrangement has been that the insurance could be arranged as a block policy and the economies of scale that follow. In addition the Local Authority would typically buy cover with very high deductibles (excesses) and self-manage any claims within the deductible this may be the first 500,000, for example. Some Local Authorities have decided to create facilities for Academies to buy into their insurance arrangements through framework agreements that they have set up, and this has been attractive to some Academies as they have good working relationships with the insurance and risk staff at the Local Authority and are able to continue this arrangement. However, the majority of Local Authorities appear to be withdrawing their support to Academies and this then means that the obvious option for the school is to seek the advice of an insurance broker. Insurers A limited number of insurance companies underwrite School/Academy/Public Sector risks within UK. Most insurers distribute and market their products using the services of a specialist insurance broker. Not all insurance brokers have access to all of these markets. Insurance Brokers Each broker will have their own attractive qualities, such as; assistance with risk management, contingency planning, access to multiple markets, property valuation services, exclusivity with an insurer, etc. A good broker should be able to help you benchmark your quotes and contrast and compare cover, terms and conditions. Insurance brokers traditionally are remunerated for their valuable input through payment of commission from the insurance company though some favour charging a fee for their services. However you agree to work with them they are an important part of the process as they ensure that your risk profile is correctly presented to the insurance company/ies and that the premium charged reflects the risk presented as equitably as possible. 8

9 Getting your insurance specifications correct In order to ensure that there are no gaps within your insurance programme that could result in a financial or other loss to your School/Academy it is important to fully disclose all factors to your broker/insurer. They can only be as good for you as the quality of the information you pass to them. Examples of this are such things as the extent of the activities of the PTA and their charitable status. It may well be that they require their own liability insurances but unless your broker is made fully aware they will be unable to advise you correctly. Another example might be the extent to which any educational trips are organised by the Academy the Tour Operators and Package Travel Regulations state that if just 2 or more elements of a trip or holiday of more than 24 hours are being arranged then the organiser has to comply with their regulations. Schools under Local Authority control are exempt from such regulations but those moving outside the Local Authority such as Academies might not be. Lastly for the purposes of illustration but by no means the sum of issues that might arise, is the matter of vehicles that are not registered for the road (ride-on motor mowers and the like) that may have access/the need to cross a public highway to reach playing fields. If the insurer is aware of any such vehicles or machinery then they can usually cover them under the Public Liability Insurance covers but if they are not made aware of the risk then you may not be afforded protection that you need. Considerations for Staff Absence Insurance Supply cover is probably the least predictable or controllable area of expenditure for most schools, and can quite easily be the main contributory factor in budget overspends. When considering protecting the school budget against the costs of staff absence you will need to firstly establish the options available to your school: At local authority level From the commercial insurance market using a specialist broker. Some Local Authorities run absence mutual funds for schools and a number of Local Authorities allow Academy schools to participate. Mutual funds operate on a not-for-profit basis and operate for the benefit of all participating schools. However, they may lack the flexibility and choice offered by commercial insurance. It would always be advisable for your school to compare the costs and cover, of Local Authority mutual funds (where available) against the cost and cover provided by commercial insurance. 9

10 When requesting quotes from commercial staff absence insurance brokers you will need to specify: the categories of staff you wish to insure eg. all teaching staff + teaching assistants how much daily benefit you require for each staff category (this is usually based on the average cost of replacement staff for each category for example, taking in to account regional variations, teachers tend to cost between 160 to 250 per day) what excess you require ( ie. how many days the school can afford to wait before employing replacement cover staff) any additional covers you may require including cover for Stress Absences and Maternity Leave Absences. If Maternity Leave cover is required you may need to provide a full list of female staff including dates of birth as some insurers will rate the risk according to child-bearing age. Most commercial insurance brokers will also ask for full disclosure of the school s claims history prior to providing quotations ie. past absence records of up to 3 years, this is to ensure the premium charged is both equitable and sustainable. If absence is fully disclosed to insurers prior to the start date of the contractual agreement the premium cannot retrospectively be adjusted. A good starting point when comparing Local Authority Schemes with commercial insurance is to obtain quotes on the same basis ie. Same staff categories, excess and daily benefit. However, it is important to note, there are a wide variety of policy wordings in the commercial insurance market for staff absence, each offering varying levels of cover and limitations; this makes it difficult for schools to easily compare commercial insurance quotes on a like for like basis; any best value exercise will therefore require a detailed analysis of each insurer s full policy wording. 10

11 Checking the small print One of the most important factors is that your broker and/or insurer fully understand the extent of all activities carried out by the School/Academy. The importance of this disclosure of the business activities will form the backbone of the policy and insurers will only respond to claims that correspond with the activities disclosed. Property Insurance On what basis is the sum insured? And have you received a professional valuation to ensure that the sums insured are adequate in the event of a claim? Does the wording include the Average clause? If this is the case it is very important to ensure that sums insured are adequate as a claim payment may be reduced by the same percentage that the sums insured are understated. Bearing in mind the foregoing, it is important that the sums insured selected take into account the effects of any future inflation. Policies can include an inflation protection factor commonly known as Day One cover which typically provides an additional 15 to 25% of cover through the policy period to protect against inflationary factors. This can be very useful where a claim occurs in the latter end of a policy period and rebuilding costs have increased since inception/renewal date. It is worth considering whether you are located in an area where there is an increased risk of terrorism and if so have you requested that this cover is included/quoted for? Check that you have included any property for which you are responsible under the terms of a lease. Does your policy cover you for loss or damage to contents temporarily removed from the school premises? This may not automatically be covered. Business Interruption Are your premises listed buildings? If so the indemnity period may need to be considered more carefully. Consider whether you need to include cover for any additional income streams you may have such as letting out premises, or additional Nursery provision. This may be more relevant to Academies. Employers Liability It is important that you estimate the accumulation of risk when determining the limit of indemnity you require. For example, should a number of staff be together at one time when an incident occurs that could give rise to claims in respect of each of them. 11

12 Public Liability Is there any limitation within the policy wording relating to Abuse claims? It is advisable to ensure that you are aware of any financial or other limits relating to claims in respect of allegations of abuse of any kind. Is the cover provided, on a claims incurred or a claims made basis? One will indemnify you against claims made during a period of cover but may not do so if claims are made outside that period. Motor Insurance Schools should have a system in place that ensures that staff members driving licences are checked at least annually for any convictions, and that there is entitlement to drive minibuses where applicable. Disclosure of convictions to insurers is very important. Legal Expenses Insurance The insurer will insist that they are involved in any dispute from the earliest possible time in order that their position is not prejudiced. What are the inner limits in respect of any extensions to this section of the policy? Are they adequate for your school? Seek advice from your broker if in any doubt. If Professional Indemnity cover is required/ included then it should be noted that it is usual for the limit of indemnity to apply in the aggregate in any one period of cover. Governors/Trustees Indemnity It is important that cover is operative on the date that the Academy trust is formed. This may be well in advance of the Academy opening its doors to staff and pupils. Fidelity Guarantee The insurance will only respond to claims where there are robust systems of financial checks in place and staff references have been taken. Staff Absence Insurance As previously stated there are a wide variety of policy wordings in the commercial staff absence insurance market today, each offering varying levels of cover and limitations; this makes it difficult for schools to easily compare quotes. By working with a reputable broker, especially a broker who can obtain quotes from different insurance markets, your school should be able to save time and effort when procuring staff absence insurance. A reputable independent specialist staff absence insurance broker should be able to help you establish the levels of cover available and give clear information on policy limitations and guidance on how these may affect your school. 12

13 Outlined below are the top five must-do small print checks when purchasing staff absence insurance. Complete these checks with your broker before you take out or renew a policy: 1. Term (Period) of the Contract Most standard policies provide cover for a minimum of twelve months and insurers will automatically invite renewal when the period of insurance expires. However, from the outset it is critical to establish, whether the exclusions outlined in point 2 Exclusions are reapplied by the insurer at each and every subsequent renewal or whether the insurer only applies the exclusions from the initial policy inception date. A market analysis showed some insurers offering Annual Contracts which specify that at each and every renewal All exclusions apply unless additional cover has been purchased and an additional premium paid to delete a policy restriction or extend cover. A school should establish with their broker, exactly what type of contract they are considering and if, how and when exclusions will be reapplied. 2. Exclusions for pre existing conditions: Pre-existing conditions can broadly be defined as any diagnosed medical condition that existed prior to taking a contract of insurance with an insurer. It is essential to clearly establish with your broker exactly how long it will be before any pre-existing conditions are likely to be covered. for pre-planned operations: Some insurers will exclude any operation which resulted from a condition that simply required a visit to the doctor or consultation prior to policy inception. Whereas other policies offer wider cover stating benefit will not be payable where the insured staff member was already on a waiting list for the operation or medical procedure prior to becoming insured under the terms of the policy. We are however aware some insurers will, when requested, remove exclusions by endorsement on an individual condition basis (this usually requires further premium adjustment), so we advise schools speak to their specialist broker. 3. Maternity Leave Cover Note: Any known pregnancies should be disclosed to your broker at time of purchase. Each provider offers different levels of maternity benefit. They are usually designed to offset the shortfall between Occupational Maternity Pay and Statutory Maternity Pay. Cover tends to be offered as an optional extension to an existing staff absence insurance policy. The Maternity Moratorium A moratorium is an initial exclusion, it defines the amount of time a school has to wait before any maternity claim will become eligible for payment under the terms of a policy. Establish what the length of the maternity moratorium is. A moratorium is usually defined in weeks or months (typically 9 month and 7 month moratoriums). The moratorium is applied from the point maternity leave cover is added on to the policy. 13

14 Restrictions on Lump Sum Maternity Payments Some maternity benefit payments are limited to maximum lump sum payments. Check the maximum payment your school can receive. Sometimes such restrictions are hidden in the small print so always ask your broker the question. Some insurers won t pay maternity claims if staff return on reduced contractual hours or do not return to work at all. Care should be taken where policy wordings restrict maternity lump sum payments to having a policy in force at the time a maternity payment becomes due, rather than paying a pro-rata payment to the point of cancellation for staff already on maternity leave. Quick Maternity Checklist Is there a maternity moratorium? Is there any reduction in cost in year one of the insurance due to the moratorium? Can I claim if the member of staff does not return to work? Will I receive a pro-rata d payment for any employees on maternity leave absence if I cancel my policy? Are there any caps on the amount I can claim? Will the amount I claim cover the Occupational Maternity Pay shortfall? 4. Cover Limitations & Benefit Analysis in s When considering policies it s important to identify cover limitations, compare the different benefit levels and calculate the financial benefits in s. To illustrate, in the table below we compare just two areas of cover in two different staff absence insurance policies, calculating the financial benefit offered by each in s: 5. Claims Each provider will have different terms & conditions when it comes to submitting claims. Before purchasing cover, check how stringent the claims process is; Some providers may have tight deadlines & require lots of evidence which can make it difficult for schools to comply. Cover Policy One Policy Two s Benefit Analyis Long term Illness, as a result of Covers up to 20 weeks before the expected Cover up to four weeks before the expected delivery date 11,900 difference pregnancy, delivery date = 11,900 (payment possible) occurring 20 weeks = 0 (No Payment) prior to the expected delivery date. 14 Absence due to Jury Service Cover for a maximum of 10 days no excess is applied = 1700 (payment possible) Cover for up to 190 days = 24,650 (payment possible) 22,950 difference Calculations based on school with 10 day excess and 170 daily benefit.

15 Funding Academies for Insurance 2013/14 From 2013/14, all academies will receive per-pupil funding for insurance as part of their general annual grant (GAG). This funding will be in two parts: An amount delegated by the local authority through local funding formulae, which is equivalent to the amount that maintained schools receive for insurance. This is estimated to be around 25per pupil on average. An additional top-up grant of 20 per pupil, to reflect the fact that, on average, insurance premiums are higher for academies than they are for maintained schools. For any academies that are concerned that they will struggle to pay for their insurance premium from their 2013/14 GAG, they can contact the EFA and discuss additional funding that may be available, which can be applied for. Academies will be able to apply for this additional funding from 1st September 2013 by submitting a form to the EFA. This process will involve the academy proving that they have either been through the CPC or have secured three competitive quotes and will need to set out the amount of funding that is being applied for. Further information about how to make a claim for additional funding and the relevant form will be available on the DfE website in advance of the 2013/14 academic year. All details supplied on this page have been taken from the DfE website and are accurate at the time of printing January CPC do not offer quotes for Staff Absence but three quotes from three different insurers can be sourced from The Education Broker. The Education Broker The Education Broker makes purchasing staff absence insurance easier for schools. We save you time and help you make an informed purchasing decision. Get 3 staff absence insurance quotes from 3 different insurers. Useful Resources National Association of School Business Management (NASBM) NASBM supports the training, qualification and professional regulation of school business managers

16 National Association of School Business Management T F E info@nasbm.co.uk NASBM, First Floor Offices, 140 Wood Street, Rugby, Warwickshire CV21 2SP