By choosing an appropriate mechanism for the management of staff absence costs, schools and academies could significantly reduce the impact on already stretched budgets.
Local Authorities are similarly under financial strain, with many now looking closely at the viability of continuing to provide discretionary services. For some this may result in a review of the costs associated with running an in-house staff absence schemes. If these are stopped, schools and academies will have little alternative but to consider a commercial solution.
Thankfully, the staff absence insurance market is relatively mature with some providers being in existence for over 20 years. The solutions they offer go beyond provision of insurance protection with some offering ancillary services such as counselling, health and wellbeing assistance.
Recently the Education Mutual has been established. This uses a mutual model with contributions (as opposed to premiums) being paid by members to a common pool. The purpose of this model is that the pool is owned by the members with little or no risk being transferred to the commercial insurance market. There are a number of benefits of this model such as the return of surplus monies to the membership when appropriate, no Insurance Premium Tax due on contributions (apart from the insured portion) and the ability to offer coverage that may not generally be available from commercial providers. For some pooling arrangements there remains a degree of risk for the member if losses from the pool exceed contributions. Education Mutual have addressed this risk by purchasing stop loss cover for the mutual fund. Not all pooling arrangements are protected in this way risk. Understanding how the mutual is structured and is performing is essential for any interested organisations.
The need to fully understand the pros and cons of any solution is arguably now more important than ever given the increased risk of absence and the financial pressures that would bring. Gaining the view from an experienced independent specialist advisor such as Gallagher will ensure you have a balanced view of available market solution rather than just the ones available from the provider you are speaking with.
Key points when considering whether a particular solution is right for you:
Annually renewable policy versus annual policy:
Will claims for ongoing absence continue to be paid at/past the renewal date, or will claims for ongoing absence cease at renewal?
Indemnity basis of settlement v Defined Benefit basis of settlement:
Will it be necessary to engage external supply staff and demonstrate financial outlay through invoices, or will the daily benefit payment be triggered by the absence itself?
Maternity related illness cover
Be aware that some wordings exclude maternity related illness much earlier in a pregnancy than some others. Know what financial effect this may have on your organisation.
Maternity and paternity benefit
Ensure that you are fully aware of any conditions relating to payment of maternity and/or paternity benefit and know exactly when it is payable and when it is not.
Pandemic conditions / exclusions
Are there any specific coronavirus / pandemic related conditions, or exclusions that may reduce or exclude claims linked to a pandemic?
Health and wellbeing services
Be sure to delve into the detail of any provision that is proposed. Will there be any additional costs involved? Know who decides whether additional medical treatments are utilised.
Helping achieve a suitable outcome for our clients
The team at Gallagher are fully versed in managing the procurement of appropriate staff absence protection from the wider insurance market. We understand the need to deliver value through the independent insurance broking and risk management services we provide to over 5,000 Public sector and Education clients.
Policy limits and exclusions may apply, please see policy wording for full terms and conditions. The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.