Following a government consultation, the Department for Education is extending the academies’ risk protection arrangement to local authority maintained schools. Alison Goodwin, Public Sector Practice Leader at Aon, explores the issues that should be considered before signing up.
Originally developed to enable academies to access affordable insurance cover, the Department of Education is set to extend the risk protection arrangement (RPA) to local authority maintained schools from April 2020. But, while the RPA’s headline rate of £18 per pupil can look attractive, it’s important to undertake a full comparison of what’s available before switching.
Cover comparison
First, it’s important to consider the cover. The RPA provides an extensive range of property and casualty covers including the reinstatement value of the property in the event of material damage; business interruption cover of up to £10m for increased cost of working; and unlimited public liability, employers’ liability and professional indemnity.
As it’s designed as a one-size-fits-it approach, this will suit some schools, but others could find there are significant gaps when compared to the cover accessed through their local authority. Alongside potentially lower limits on some areas of cover – for instance £100,000 of personal accident cover through the RPA compared to no fixed limit for insurance arranged by the local authority – some covers are outside the RPA, notably engineering, motor and cyber insurance.
There are also concerns that, as the RPA is a pooled pot of money rather than an insurance policy, a run of large claims could cause serious problems.
Support services
Cover is one element that needs to be considered but it’s also important to note that the recharge a local authority makes to a school doesn’t just comprise the cost of insurance. As well as the cover, the insurance team can also provide valuable risk management advice, claims support and handling, and site inspections to identify and manage operational risks. It may be necessary for local authorities to levy a fee where these services are provided to schools in the RPA.
Additionally, while the RPA does include £100,000 of cover for legal expenses, in some situations, this could be far below the value of the support provided by the local authority’s in-house legal team
Break time
As well as assessing how any losses would be treated under both arrangements, issues could also arise as a result of a school moving to the RPA. Removing schools from an authority’s programme could be regarded as a break in the long-term agreement (LTA), potentially leading to insurers increasing premiums. In the current hardening market, this could prove expensive.
It’s also worth considering how a shift might affect an authority’s insurance programme. For instance, in its response to the government consultation, Alarm stated that although removing schools from a local authority’s insurance programme would reduce premiums for areas such as material damage, they would be unlikely to see any significant reduction for liability cover. This could have implications for the council’s overall budget.
Insurable interest
Alongside the financial implications relating to the programme, local authorities also need to consider how the RPA might affect their legal position. As the statutory body, the authority would maintain responsibility for education, regardless of whether or not the school opts into the RPA.
This means that, should a claim arise, the local authority could find itself facing legal action too. As a result, even where schools are in the RPA, insurers will continue to reflect this risk in the local authority’s premiums.
Conclusion
Local authority maintained schools considering a switch to the RPA must carefully consider the implications of such a move, including factoring in the cost of services provided by their authority as well as insurance covers outside the RPA.
It will represent good value for some schools, but it is essential that they understand all the implications and potential costs that they, and their local authority, might face, before they make a decision.
For more information, contact Alison Goodwin at [email protected]