(This article is part of a three-part series exploring Labour’s Employment Rights Bill. This is Part 3, focusing on the potential impact of the bill on insurers and employers.)
Introduction
The Employment Rights Bill, poised to overhaul employment law in the UK, introduces numerous provisions that could significantly affect both employers and insurers. This article examines the potential implications for insurers, particularly those offering business insurance, as they navigate the new landscape of employment rights and obligations.
Potential Impacts on Insurers
One of the critical concerns for insurers, particularly those providing business insurance, is the potential increase in claims related to harassment and other employment rights breaches as a result of the new legislation. The expansion of unfair dismissal protections, the outlawing of ‘fire and rehire’ practices, and the new right to compressed hours could all contribute to a rise in employee claims.
Key areas of concern include:
- Increase in Harassment Claims:
With the introduction of flexible working as the default along with the potential for compressed hours and the introduction of rules requiring employers to take reasonable steps to prevent sexual harassment that were agreed under the Conservative party, there could be increased friction between employers and employees regarding expectations, workload management, and the balance of responsibilities. These tensions might result in a higher volume of harassment claims, as employees may feel pressured or unfairly treated under the new working arrangements. Insurers should be prepared for a potential uptick in such claims, both in terms of their own employees and those of their clients. - Breach of Employment Rights Claims:
The removal of the cap on unfair dismissal compensation and the simplification of the process for bringing claims are likely to make it easier for employees to pursue legal action. This may result in an increased volume of claims against employers, which in turn could lead to a higher number of claims being filed with insurers. Insurers should closely monitor the development of these legislative changes and consider their implications for risk assessment and policy terms.
How Insurers Can Support Their Insureds in Adapting to the New Legislation
As the new Employment Rights Bill is introduced, insurers have a pivotal role to play in helping their insureds navigate the transition smoothly and minimise the risk of increased claims. Here are some strategies insurers can adopt to support their clients:
- Proactive Risk Management: Insurers and brokers should work closely with their insureds and clients to assess the potential risks posed by the new legislation. This includes guidance and assistance in conducting comprehensive risk assessments that identify areas where the business may be vulnerable to claims, such as harassment, discrimination, and breaches of employment rights. By identifying these risks early, insurers and brokers can help their clients implement measures to mitigate them, such as revising workplace policies, enhancing training programmes, and improving internal dispute resolution processes.
- Providing Guidance and Resources: Insurers and brokers can offer guidance and resources to their insureds and clients on how to comply with the new legislation. This could include providing templates for updated employment contracts as well as policies and procedures that reflect the new legal requirements. Additionally, insurers and brokers could host webinars or workshops to educate employers on the implications of the new laws and best practices for compliance. This proactive approach can help insureds avoid costly legal disputes and reduce the likelihood of claims.
- Enhancing Employee Relations: Encouraging insureds to focus on employee relations can be a key factor in reducing claims. Insurers can advise their clients on the importance of clear communication with employees regarding changes to their rights and working conditions. Ensuring that employees understand their new rights under the legislation and feel supported during the transition can help to prevent dissatisfaction and reduce the risk of disputes escalating to claims.
- Tailored Insurance Products: Insurers could consider offering tailored insurance products that address the specific risks associated with the new legislation. For example, policies that provide coverage for employment practices liability, including claims for harassment, discrimination and wrongful termination may become increasingly valuable to businesses. By offering products that directly respond to the challenges posed by the new laws, insurers can better meet the needs of their clients.
- Ongoing Monitoring and Support: Finally, insurers and brokers should provide ongoing monitoring and support as the new legislation is implemented. This could include regular check-ins with insureds to assess how they are adapting to the changes and whether any new risks have emerged. Insurers could also offer additional training or resources as needed to help businesses stay compliant and manage any new challenges that arise.
Conclusion
The Employment Rights Bill, as proposed by Labour, represents a significant shift in the landscape of employment law in the UK. As the bill progresses through Parliament, close attention should be paid to its final form and any additional changes that may impact the insurance industry. While it promises greater protections and rights for workers, it also introduces new challenges for employers and insurers alike. By taking a proactive and supportive approach, insurers can help their insureds adapt to these changes, minimise the risk of increased claims, and ensure a smoother transition to the new legal framework.
(This concludes our three-part series on Labour’s Employment Rights Bill. Stay informed and prepared as this significant legislation takes shape.)
For more information, please contact Natalie Larnder - Head of Market Affairs or Vanessa Latham - Partner
