Personal Insurance Indemnity Policy

Report: 08
Date: 22 January 2009
By: Treasurer and the Director of Resources on behalf of the Commissioner

Summary

The Finance Committee ratified informal approval of the Personal Insurance Indemnity Policy (PIIP) in November 2004. This followed agreement in principle by MPS Management Board that MPS personnel should be indemnified by the MPA in certain tightly defined situations where their own personal life and accident insurances do not provide an indemnity.

The Finance Committee required that the PIIP be subject to annual renewal and that an annual progress report be provided summarising key developments since implementation of the policy. This is the 2008 progress report.

A. Recommendations

That

1.  members approve renewal of the policy for a further 12 months;
2. note activity in year in respect of enquiries about the policy and the volume of claims and/or payments; and
3. note the Home Office response for a Central Government indemnity top up.

B. Supporting information

1. Renewal – in line with internal review procedures, the PIIP and its associated Standard Operating Procedure (SOP), underwent a 3 year review, to ensure continued fitness for purpose, as well as this annual renewal approval process to MPA F&R Committee. The Policy and SOP continue to give the reassurance to officers and staff involved in high risk duties, that they will not be financially penalised because their own personal insurance arrangements refuse to pay out because the job restricts that they can disclose. In addition, the internal reserve set aside for these eventualities now stands at £ 680,000. It is therefore recommended that the PIIP be renewed for another 12 months.

2. As part of the 3 year review, a consultation exercise with key stakeholders took place, asking how relevant the PIIP was to them, how well it worked and any areas of improvement. The PIIP, by its very nature, is intrinsically linked to insurance policy wordings and by making the SOP too general in terms of its wording, would result in incorrect assumptions being made by the reader as for example, “breaches of material facts” have to be explained in some detail so that the reader can appreciate where and when the PIIP might operate. So it was expected and resultantly confirmed, that the majority of the feedback was that the SOP was not the easiest document to interpret. An Appendix has now been included in the SOP, explaining all the terms referred to therein, as well as the development of an “aide to decision making” flow diagrams, to assist in the decision making disclosure issue. A brief 1 page summary is to be included on the MPS Insurance Management Team web site to further assist as well as some further briefing sessions.

3. Reference to the PIIP within the MPS Overseas Travel SOP, Form 9750 (overseas deployment authorisation) and the travel services insurance intranet site has been reviewed to ensure further clarity and unification of approach.

4. Activity - There have been nine specific enquiries to the Insurance Management Team covering 32 MPS officers regarding the PIIP and its possible application during the year. The main reason for the enquiries, is seeking clarification that the MPA indemnity will come in to play when for reasons of operational security, the activity cannot be dislcosed to the officers insurers. Reassurance is given on this basis as well as reminders to officers that the PIIP is primarily a contingent cover, in that it will only come in to play should their own personal insurances default in the payment of a legitimate claim.

5. There has been to date only one request from an officer to increase the limit under the PIIP from £500,000 to £503,213, this being their maximum worst case scenario payment limit for their life and personal accident policies together. It was agreed that the balance of £3,213 would be picked up by the Borough locally. The current limit fo £500,000 remains adequate for PIIP purposes.

6. Central government mass claims indemnity – The Finance Committee approved an approach by the Director of Resources to Central Government for a ‘top-up’ indemnity to cover mass claims arising from a catastrophe situation. The Home Office have made it quite clear in their response to this suggestion that “we do not believe that it would be appropriate for Central Government to become involved in matters such as this” and “..sorry to have to send to you a disappointing reply but I thought you would appreciate a clear statement as to the position.” On this basis, it would be prudent to continue to build up the self insured reserve (ref Section D Financial Implications) to take in to account this possible shortfall. The Association of Police Authorities had also supported the approach to government for a mass claims indemnity and have noted the response. Tthe APA’s preference is that the Government provides the additional cover in the relevant circumstances. The APA has stated “We are keen to work with Police Authorities, including the MPA, for further discussions with government about the issue, if required.” Based on previous MPA policy, the MPA would support any further any further approaches by the APA to government. In previous reports to committee it was agreed that no high-risk activity was excluded from the scope of the policy, but that the MPA’s self-insurance capacity imposes a limit on claims payable in the absence of a Central Government indemnity and the following clause to the indemnity was agreed:

"The indemnity is not intended to and does not extend to cover mass claims resulting from personnel carrying out their duties in events that involve large scale casualties or are otherwise catastrophic in effect, due to the financial limitations of the MPA self-insurance fund. Notwithstanding that general exclusion, the MPA may in its absolute discretion accept and cover claims arising from such events and may in its absolute discretion cover only a proportion of the amount that might otherwise be claimed.”

C. Legal implications

The power of the Authority to grant this indemnity and the terms and conditions of the indemnity were the subject of legal advice prior to approval being granted. Subsequent material changes to the wording of the indemnity have been cleared with the legal advisers.

D. Race and equality impact

The policy applies to all MPS police officers and police staff and the work to promulgate the policy and response to enquires has been carried out on that same basis.

E. Financial implications

1. To date there have been no claims received by the Insurance Management Team for consideration by the indemnity offered under the PIIP and therefore no money has been paid out under a reserve set aside to cover these eventualities. This reserve will stand at £680,000 (as at 31 March 2009). It has previously been agreed that this reserve is to be increased by £175,000 per annum.

2. A top-up indemnity would cap the Authority’s potential financial liability at a level consistent with its self-insurance limits but with the rejection of the Home Office of topping up mass claims, this financial risk is still present.

F. Background papers

• MPA Finance Committee November 2004: Report on the Personal Insurance Indemnity Policy and Management Board reports MB(04)77 and MB(04)99
• MPA Finance January 2006: Progress Report on the Personal Insurance Indemnity Policy
• MPA Finance October 2007: Report on Approach for Central Government Indemnity
•  MPA Finance December 2007: Progress Report on the Personal Insurance Indemnity Policy

G. Contact details

Report author(s): Gordon Mitchell, Strategic Insurance Manager, MPS

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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