Aon has identified that many UK employees do not accurately record sickness absence. Published in November 2018, this insight was obtained by conducting group risk market reviews for employers.

Group risk insurers require information on who is absent, the reason for their absence, duration, and more information such as prognosis. Aon, through its market review activity, has seen that some employers either do not record their employees’ absences or have gaps in the data that they give to insurers, such as when an absence is not consistently and accurately recorded internally.

This can negatively impact insurance premiums, increase business risks for staff involved in the process and impact claim payouts. The issue may become greater as the group risk market continues to grow, and because the introduction of the Insurance Act 2015 could have serious implications for company decision makers and administration staff if relevant facts are not recorded.

This is a twofold problem in that the Insurance Act imposes a ‘duty of fair presentation’ of the relevant facts on employers, meaning a lack of robust absence recording could potentially mean failing in this duty. The Act states that the employer’s knowledge is deemed to go from the top of an organization down, and can include decision-makers and staff involved in administration, meaning errors could be costly and potentially high-profile.

On top of this, non-compliance can prompt serious business risks such as inadequate pricing, disputed claims, forfeiting rebates, loss of claim monies or invalidating acceptance of claims.

Key Risks

The key risks that impact employers and employees are:

• Insurers may assume a worst-case scenario from a pricing perspective or be unwilling to quote if they are not confident in the information provided.
• Claims can be disputed for undeclared or misrepresented absentee details, potentially resulting in a shortfall in claim payout, or the insurance policy could be invalidated.
• Premiums will also be negatively affected by poor controls over absence or a lack of proactive management, as this can increase the risk of long-term absentees and claimants.
• Certain policies have in-built financial incentives for early notification of absences to the insurer. Non-compliance can result in the employer forfeiting a premium rebate.
• Insurers need to be advised of claims within a certain period. Not notifying them in good time may result in the loss of claim monies, or even invalidate acceptance of a claim.

Case law on this issue has not yet developed, but an inadequate record of absences is unlikely to be an excuse for failures in disclosure.