Personal Insurance Indemnity Policy – progress report

Report: 07
Date: 19 January 2006
By: Treasurer and Commissioner

Summary

The Finance Committee gave provisional approval to a Personal Insurance Indemnity Policy in December 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 asked for a progress report on the indemnity policy after it had been in operation for 12 months to inform a decision on final approval.

A. Recommendation

1. To agree that the indemnity policy should now operate for an indefinite period subject to termination by the MPA on not less than two months notice at any time (such termination to be without prejudice to claims arising before the date of termination); and that the Authority receive an annual report from the Commissioner on the performance of the indemnity and any proposed changes in its terms or operation in the light of experience or the assessment of risk (paragraph 13, first bullet point)
2. to agree the creation of an insurance indemnity fund (paragraph 10)
3. To note various revisions to the indemnity policy (paragraph 13)
4. To note the results of a communications exercise and the use of the indemnity policy in specific instances over the last 12 months.
5. To note progress regarding a Central Government indemnity in relation to ‘unaffordable’ claims.

B. Supporting information

1. In December 2004, members approved a Personal Insurance Indemnity Policy following MPS Management Board agreement to the principle of MPS personnel being indemnified by the MPA in certain tightly defined situations where their own personal life and accident insurances do not provide an indemnity. This includes situations where life and accident insurances are invalidated through non-disclosure of material information relating to high-risk duties that cannot be disclosed to their insurers for operational security reasons.

2. The indemnity policy was approved provisionally for a period of 12 months with a request that a further report be submitted to enable members to consider extending the policy beyond the initial period.

3. Currently the indemnity policy does not cover mass claims from a catastrophic event where the potential financial liabilities could far exceed MPA self-insurance limits. In all other respects the MPA is able to meet the costs of any claims from its self-insurance fund.

4. A summary of the MPA Personal Insurance Indemnity Policy is attached at Appendix 1 for reference purposes.

5. To date three major briefing sessions have been conducted with senior management teams representing areas of MPS business most likely to be affected by the policy. The briefings have been given by the Director of Risk Management and Head of Accident Claims. The sessions have been well received and the information given cascaded to key personnel. A presentation will be made to the Serious Crime Directorate to coincide with the launch of a revised MPS overseas travel policy incorporating information about the Personal Insurance Indemnity Policy.

6. The policy and associated standard operating procedure has now been added to the MPS policy database.

The value of the indemnity policy

7. One team of four officers from the Serious Crime Directorate, scheduled to travel abroad to a high-risk location, have made an application for coverage by the indemnity policy. These officers have been assured that the policy is applicable in the particular circumstances that apply.

8. Although only this one actual request for coverage by the indemnity policy has been received, there have been numerous enquiries regarding the indemnity policy during the year. Positive feedback has been received on the assurance that this indemnity gives staff and officers involved in high-risk activities. The policy fulfils a need effectively and economically.

9. To date, there have been no claims for indemnity under the policy and no money has been paid out.

10. A temporary insurance scheme covering travel abroad has been lapsed this year following the implementation of the Personal Insurance Indemnity Policy. This has resulted in annual premiums savings of at least £170,000. It is felt that members would support the opportunity to use this 'released' annual budget to build up an earmarked reserve over the years from which any payments in respect of the indemnity could increasingly be financed, this being prudent protection for the main MPA self-insurance fund.

11. Whilst the events of 7 July did not give rise to claims under the indemnity policy, they clearly demonstrate the potential for claims should further such incidents occur in the future.

Review of indemnity policy terms and conditions

12. It is an opportune time in which to review the terms and conditions of the indemnity policy. As far as one can tell without there having been any actual claims under the policy, the drafting – contributed to by the MPA’s external legal and insurance advisers – has proved effective.

13. However, it is proposed to make various enhancements to the policy. These have either been drafted or reviewed by the MPA Deputy Clerk and Solicitor. Subject to approval of the revisions by Members, they will be submitted to the MPA’s external legal and insurance advisers for comment prior to reissue of the policy.

• Members originally approved the indemnity policy on a 12 months ‘trial’ basis. It is now considered appropriate to extend the policy indefinitely subject to the inclusion of a termination provision and requirement for the MPS to report annually to the Finance Committee. The form of words used in Recommendation 1 will be incorporated in the policy.
• Unless and until Central Government provide an indemnity in respect of unaffordable claims there is a theoretical but very low likelihood risk of mass claims exceeding the capacity of the MPA’s self-insurance fund. To clarify the situation that no high-risk activity is 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, we propose the following clause:
  • "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.”
• As claims from a Chemical, Biological, Radiological, Nuclear (CBRN) situation are no less amenable in principle to being treated by an indemnity of this nature than claims from any other high-risk event, the following item has been added to the examples of high-risk activity:
  • “First respondents to Chemical, Biological, Radiological, Nuclear (CBRN) incidents.”
• Various MPS colleagues have expressed concern about the absence of any indication in the policy as to how long a claim under the policy would take to be settled. Whilst every effort would be made to handle claims quickly in the absence of a specific provision requiring us to do so, we have added the following clause as reassurance for claimants:
  • "Accident Claims (DCC8(6)) will endeavour to substantially progress a claim under the PIIP within three months of receiving the appropriate documentation.”
• We are aware of one other force that has implemented a personal insurance indemnity policy: West Yorkshire Police (WYP). WYP’s policy includes an internal appeal process where a claim under their policy is rejected. This provides further reassurance for personnel. We propose to add a similar provision to the MPA policy as follows:
  • “In the event that a claim under this policy is rejected an appeal may be made to the Commissioner. If the Commissioner upholds the decision the matter will proceed to arbitration in accordance with the arbitration provisions set out in the policy.”
• It is necessary to consider the consequences of a payment under the indemnity policy from a personal tax perspective. We propose to include the following taxation clause:
  • “The recipient of any sum paid under this policy shall be responsible for the payment of any tax and other statutory deductions in respect of that payment and to indemnify the MPA against all liabilities to taxation or statutory deductions.”

14. We shall consider whether our policy should be formatted along similar lines to the WYP policy, the formatting of which is impressively clear.

Proposed Central Government indemnity

15. Whilst the indemnity policy is essential for the reassurance of personnel, full reassurance cannot be given due to the remote, but real, risk of an event giving rise to mass claims that exceed the MPA’s ability to pay (known as the “unaffordability” issue).

16. We are working with colleagues in British Transport Police, City of London Police and the other London emergency services on a joint approach to Ministers for a Central Government indemnity in relation to unaffordable claims under the MPA indemnity policy and other similar policies.

17. On 8 December 2005 the Association of Chief Police Officers (ACPO) Cabinet approved the following recommendations:

• ACPO President to write to all English and Welsh forces advising that they consider replicating the MPA indemnity policy (one force had done so prior to the Cabinet decision and others are working towards this).
• ACPO President to write to the Ambulance Services Association and Chief Fire Officers Association requesting support for a joint approach to Ministers for a Central Government “unaffordability” indemnity.

18. It has also been suggested to the ACPO President that he writes to the senior civil servant co-ordinating the Cabinet Office Civil Contingencies Secretariat in view of the links to national resilience.

19. The Director of Risk Management has submitted a briefing paper to the Office of the Deputy Prime Minister at their request.

20. We will continue to press Central Government for action on this matter so that full reassurance may be given to our personnel and those of other police, fire and ambulance services that replicate the MPA indemnity.

C. Legal implications

The MPA Deputy Clerk and Solicitor and the MPS Director of Legal Services have been made fully aware of the indemnity policy.

D. Race and equality impact

The policy applies to all MPS police officers and police staff, and the work to promulgate the policy and respond to enquiries follows this principle.

E. Financial implications

1. The cost of claims under the indemnity policy are to be met from the MPA self-insurance fund. Mass claims arising from events that involve large scale casualties or are otherwise catastrophic in effect are excluded due to the financial limitations of the fund.

2. To date there have been no claims for indemnity under the policy and no money has been paid out under the policy.

3. The indemnity has enabled savings in insurance costs of at least £170,000 per annum.

F. Background papers

• MPA Finance Committee November 2004 Report on the Personal Insurance Indemnity Policy and Management Board reports MB(0477 and MB(04)99

G. Contact details

Report author: Nick Chown, Director of Risk Management MPS and Ken Hunt, Treasurer, MPA.

For more information contact:

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

Appendix 1

Summary of Personal Insurance Indemnity Policy

Introduction

The MPS Management Board has agreed to MPS Officers and Staff in high-risk situations, being indemnified by the MPA where their own personal life and accident insurances fail to provide an indemnity.

Application

This policy is now in place. This policy applies to you if you are a Metropolitan Police Officer or member of Police Staff engaged or who may be engaged on high risk duties.

Purpose of the policy

The personal insurance indemnity policy is designed to put the person concerned in the position they would have been in had they been entitled to claim under their own personal insurance (qualifying insurance) but only if they had made every reasonable effort to arrange the appropriate insurances for themselves. The Standard Operating Procedure contains guidance on how to make a claim under this personal insurance indemnity policy.

Scope

Two main situations are covered by the personal insurance indemnity policy; first where an insurance claim under the Officers/Staff’s qualifying insurance is not successful and second where personal insurance can only be obtained at an unduly high premium (due to the nature of the high risk activities).

Policy statement

You must make full and accurate disclosure to your insurance company in compliance with the general law applicable to insurance and the terms of any relevant insurance policy unless this would contravene operational security requirements. Where full disclosure cannot be made without contravening operational security requirements, the MPS will provide:

• Guidance on what to say to insurance companies to ascertain if cover can still be provided
• Access to advice in arranging alternative insurance where required
• An indemnity where all these avenues have been exhausted

Who can benefit?

• You
• Your family and other dependents

Responsibilities

This policy is owned by the Corporate Risk Management Team (CRMT) is responsible for the monitoring and review of this policy. Day to day enquiries in relation to the policy are to be directed to M Birt of Accident Claims (DCC8(6)) on 58902.

Associated documents and policies (available from the Policy Clearing House)

• Personal Insurance Indemnity Policy
• Personal Insurance Indemnity Policy - Standard Operating Procedures
• MPS Overseas Travel Policy

Send an e-mail linking to this page

Feedback