Feature article

Will age laws spark a rise in claims?

Insurance Day, 28 September 2006

As the UK government outlaws sayings like “wet behind the ears” or “over the hill” in the workplace, Liz Booth looks at the potential impact of the new age discrimination laws on insurers

On 1 October, the UK will introduce laws to prevent age discrimination in recruitment, employment and training and which will stop most enforced retirement before 65.

Insurers will be impacted, not just in terms of policies but also as employers.

But it is not all bad news. Earlier this week, news reports were suggesting that some motorists expect their premiums to drop, arguing that as young drivers they were being discriminated against.

Unfortunately for those drivers, insurers will remain able to identify high-risk groups and charge higher premiums for those people, including young drivers, who are statistically at more risk than mature drivers.

A spokesman for Zurich and another for the Association of British Insurers (ABI) both confirmed that this had been raised as an issue by policyholders but that the situation would remain unchanged for insurance purposes.

However, there are plenty of areas in which insurers will need to keep a watchful eye. Group life policies, for example, may fall foul of the new law by excluding employees who are above a certain age. The ABI spokesman says it is still unclear whether these policies will be affected and that it was something under discussion.

One area in which there will be a cause for concern is in employers’ practice liability. Insurers here do not have to look far to see how big the impact could be.

For example, Ireland has had an age discrimination law since 1988, and today about 22% of all discrimination cases in the country relate to age. Law firm Berry Smith reports that there was a 40% increase in tribunal cases when age legislation was introduced in the US. Its lawyers say: “Most legal experts agree that age could lead to more discrimination claims than anything that has gone before, including sex, race or religion.”

The UK has already seen applications made to employment tribunals almost treble in the past decade. The fear is that this new law will cause a further surge.

Alan Tyrrell, chairman of the Federation of Small Businesses, has warned that many small companies are unprepared for the new regulations and “as a result could find themselves facing costly legal claims”.

The ABI spokesman says that ageism will become another factor for insurers to consider when taking on a risk. But there have been some worrying figures suggesting that many employers do not know how the new rules will affect them.

Earlier this week, a survey by the Employers Forum on Age found that 50% of its respondents did not know ageism in the workplace would be outlawed. The poll of 1,000 people aged 16 or over also found that 61% knew of cases involving ageist behaviour where they worked.

And a separate survey for charity Help the Aged found that just 42% of 1,000 people polled knew that the law on age discrimination was about to change.

KEEPING ABREAST

The spokesman for Zurich says, however, that insurers expect employers to keep abreast of change in the law.

He says: “Zurich is encouraging all employers to be fully aware of the new law and to understand the full implications for their business.”

The spokesman adds that “while the firm does not expect any extra employers’ liability claims where the discrimination has not caused injuries, there may be a small adjustment on employers’ practices liability claims as employers adjust to the new rules”.

He says employers have a responsibility to keep an eye on changing regulations - a job made easier by the government’s decision to limit the introduction of new rules to two dates each year.

For example, Sunday also sees the advent of new fire-safety regulations which will mean that all organisations, the self-employed and people in general will be asked to take greater responsibility, carrying out fire risk assessments, information and training for staff.

And there are new rules surrounding maternity cover that will affect even the smallest businesses, which had previously been exempt from the regulations.

The Zurich spokesman says: “We have an expectation that our insureds, who are employers, know what is going on.”

As an employer, he says, Zurich also had to review its own practices to make sure it would not break the new rules when implemented and make any adjustments if needed.

UNLAWFUL DISMISSAL

Under Employment Equality (Age) Regulations 2006, it will be illegal to discriminate on grounds of age unless there is a genuine occupational reason to do so. The government also set a national default retirement age of 65 and any dismissal for retirement before that age will be unlawful unless certain procedures are followed.

But it has postponed implementing the rules relating to pensions until December 1 to give employers and their pension schemes more time to digest the changes.

Meanwhile, from Sunday, employers will have to be extremely careful when advertising vacancies. They will have to ensure they do not exclude any age group. Even requiring certain qualification requirements could also have a discriminatory effect. An example of this would be asking for qualifications that have only recently been created, such as media studies.

“I think most employers are aware of the new laws, but very few are clued up or geared up - most seem to have a suck-it-and-see approach,” says Tom Bray, an employment lawyer with Cardiff legal firm Berry Smith.