03 Oct What’s the real cost of insurance?
Not the most thrilling dinner party conversation I’ll grant you (depending upon your social circle of course), but a topic that holds considerable importance in the world of health and safety. In fact, the closer you look at the implications of what insurance represents, the more you realise how important it is, especially considering how little the subject is discussed.
There’s a big problem with insurance
Not only is it difficult to understand and manage, it’s also the backup plan when it comes to health and safety. A backup plan that means the financial consequences of people getting hurt are ‘already covered.’ For an organisation to financially manage some potentially very serious (and therefore expensive) incidents, it’s the most efficient way to do things.
Why is this a problem?
It’s the effect that this perception of insurance creates. For the people most affected by the cost of health and safety failure, insurance acts as a sugar-daddy with the cheques already written.
Furthermore, insurance is often bought by someone in a different department so the link between cause and effect is even less transparent for those it should matter to. On top of this, insurance costs for health and safety failure are rarely seen on their own, it’s usually bundled up as a package of insurance.
In short, it’s difficult to decipher the real cost of health and safety failure in an organisation. And in turn that makes it very difficult to construct an argument for investing in health and safety in purely financial terms, because the only remaining justifications for improvement are moral or legal. Both of which are emotionally fraught and impossible to quantify.
Make it transparent then have the conversation
To solve the problem, first ask questions to find out what your insurance premium is. It isn’t too hard to put estimates on the insurance premium for those in the know. Once you have that figure, combine it with the HSE’s estimates of the ratio between insured cost and uninsured cost (an average figure of 1:10) and make this number transparent across your organisation.
You’ll find that most people are shocked at how big this number actually is, especially if it has previously been kept hidden. People will then realise the serious financial consequences of getting things wrong. Only then do I believe that you can have a sensible conversation about what health and safety failure really costs your organisation and make proper judgements about what you can do to fix it.