AXA - Be Life Confident

• Businesses at risk from growing UK compensation culture

AXA is warning that UK businesses are increasingly under threat from litigation. Research conducted by the company reveals that a quarter of employers surveyed have been involved in a litigation case. Of those companies, during 2004 over half were involved in one case and a further 20% were involved in between two and four cases. But how successful were they when it came to protecting their interests and winning their cases? 16% of the companies involved in a case didn't win, less than half were successful in winning one case, and only 11% won between two and four cases.

Doug Barnett, risk control strategy manager at AXA Insurance comments: "Despite the risk of litigation, almost a quarter of SMEs admit that they are not aware of the extent of their liabilities as an employer. Our research shows that too many companies are unnecessarily exposing themselves to the threat of being sued for compensation. The cost of bringing or defending a legal action can put serious financial pressure on a business, whether it eventually wins the case or not."

Businesses can potentially be sued by an employee, a customer, a supplier or a member of the public. In particular, businesses should ensure that they understand how employment legislation could impact on their company. During the past year £6.2million has been awarded in employment tribunal payouts¹. This sum, awarded across 368 cases throughout 2004, shows a 45 per cent increase on the previous year, when the total payout was £4.3million. Businesses should also remember that litigation pay-outs set precedents for future settlements.

AXA's research also asked whether or not SMEs thought that the growing trend toward a culture of litigation/legal action poses a risk to their business. Nearly half of UK SMEs (47%) believe that it does. To reflect this trend AXA's small business insurance packages have been enhanced to include legal expenses cover.

When asked about why the UK has become a more litigious society, SMEs have varying views. Half put it down to us living in a bigger blame culture these days. 31% cite the increase in ´no win/no fee´ offers available and 11% say that people have become more aware of their rights. A further 6% blamed the fact that the laws are more aligned to the ´victim´.

Compensation facts:

• There were fewer awards for sex and race discrimination cases (3.5 per cent), but a huge leap in cases of "disability discrimination" - with awards up 89 per cent in 2004
• It was also disability discrimination that attracted the highest awards, with an average payout of £28,889
• That was more than double the next highest class - race discrimination, which brought average payouts of £13,720
• Tribunals awarded £100,000 or more in nine per cent of disability cases, against just one per cent of sex cases, and no race cases
• Awards in the highest band, more than £100,000, rose from four in 2003 to 11 in 2004
• Almost two thirds of all awards - 63 per cent - were for £5,000 or over

AXA's website www.axa4business.co.uk offers free advice to businesses on a range of issues including developing business continuity plans. This includes a business continuity calendar which highlights everyday business risks, a business continuity guide for small businesses and ´Business 4 Tomorrow Toolkit´ that draws on AXA's wealth of experience and expertise to provide small businesses with a simple and practical approach to business continuity planning.

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