Council cutbacks in England may be inevitable to continue essential service delivery in a time of high inflation and cost of living demand. Cutbacks may include insurance programme reviews, where cover is reduced to save money. This may leave councils with a ticking timebomb.
Press reports indicate that council tax in most English counties is expected to rise by the permitted maximum of 4.99%, adding an estimated £100 a year to the average property bill.
However, three local council districts experiencing severe financial difficulties have been given ministerial dispensation to increase council tax by up to an eye-watering 15%. This is bad news for residents in these areas but reflects the real disparity in finances councils may face.
The Government has committed to providing more money to local councils this year, but with continued pressure on services it is not enough. In addition, the challenges of a growing ageing population, the impact of inflation and the cost of living crisis, will take more out of council coffers. In addition, rescinding the 1.25% Health and Social Care Levy planned as an additional tax from 6 April 2023, on top of COVID-19 expenditure and a general reduced budget since austerity began in 2010, equals a heavier burden on council tax and commercial rents than ever.
Cutbacks and cost savings
Local councils deliver over 800 services, ranging from adult social care, environmental health, libraries, trading standards, children’s services, and highway maintenance, to public health and planning. How can local councils find cheaper ways of providing these services without compromising standards and increasing risk?
From a risk and insurance perspective there are bound to be repercussions from councils providing services with reduced funds, plus further real-time budget cuts. The communities councils serve will be impacted, but other knock-on effects could easily find their way into insurance programmes and risk management budgets.
Insurance premium savings
Councils may have to make savings on insurance premiums by reducing their cover on exposures such as:
- Higher excesses or deductibles – and paying claims from their own shrinking budgets.
- Reducing risk management funds – the money set aside to manage the day-to-day operational health & safety risks or the more strategic risks that threaten their existence and reputation.
- Reducing headcount, resulting in decades of experience walking out the door, not to be replaced.
- Not renewing the specialty classes of insurance, such as cyber. There is a real concern within the broking community that this risk is being ignored. Cyber crime continues to increase.
- Opting for lower limits of indemnity for employers’ and public liability covers, which can potentially bankrupt an organisation if sufficient cover hasn’t been set.
Fourth industrial revolution
To add to all of this, there’s the constant headache that evolving and new emerging risks bring to the insurance programme. These are risks that might not have been considered yet but could already be impacting the claims experience.
The scale, speed and complexity of digital developments driving the fourth industrial revolution are unprecedented. Improving the electric car infrastructure is an enormous task, and we now have e-scooters and food delivery robots roaming the highways, so the clock is already ticking. And we’re just scratching the surface when it comes to artificial intelligence and chatbots and how the public expects to interact with speed and accuracy, while continuing to value human interaction.
Sharing knowledge and experience
All the above have the potential to backfire for organisations without appropriate risk management and claims handling solutions. It is vital to manage and understand any adjustments to policy cover and associated risks, and consider appropriate measures that can help prevent problems before they occur.
Risk managers are constantly under pressure to find better, more cost-efficient ways to deliver claims management services, but controls are tighter, social concerns are higher, and every decision is under scrutiny.
Claims handling specialists with council experience can help by sharing knowledge and expertise and providing guidelines on what to look out for. They can highlight emerging claims trends while suggesting time and money-saving solutions on a wide range of potential insurance issues.
It’s a good time to reach out to your insurers, brokers, loss adjustors, claims handlers and specialist partners to help you make the right decisions at this time of squeezed budgets.