LGA to explore local government mutual to reduce cost of insurance

The Local Government Association has called on local authorities to become founding members of a local government mutual aimed at reducing the amount councils spend on insurance.

The Association said the establishment of a mutual could also help support improved risk management through the sharing of best practice.

Councils nationally currently spend more than £650m a year on insurance ranging from property damage and fleet cover to employers’ liability and protection against cyber-attacks, the LGA said.

The new mutual would aim to provide improved protection to LGA member authorities at a competitive rate and would be owned and controlled by its local authority members.

The Association said: “The LGA is confident that a local government mutual can deliver better cover and service at a reduced cost. By way of example, The Fire & Rescue Indemnity Company - set up in 2015 by nine fire authorities - achieved a surplus of £471,428 in its first year of trading - 12.5% of their contributions, and has been nominated for industry awards.”

It also argued that mutuals had an inherent interest in sharing best practice and supporting their members to manage risks more effectively, thereby helping to reduce risk related incidents over time.

According to the LGA, founding members would not need to change their insurance arrangements. They would need to provide an elected member to join the mutual’s Board and help establish its governance and management arrangements and oversee its launch.

The aim is for the mutual to be available as an alternative form of risk transfer for councils from April 1 2018, when the majority of current local authority insurance arrangements fall due for renewal.

Lord Porter, LGA Chairman, said: “Councils spend hundreds of millions of pounds on insurance nationally. They also routinely work together to share best practice and support each other to improve, but currently are limited in doing this by understandable confidentiality around insurance contracts.

“The LGA has for some time been exploring options for the development of a cost-effective alternative to the conventional insurance market products and services available to local authorities.

“Mutuals are long-established and trusted. A local government mutual would save councils money and give members the chance to control and manage their risks, claims and cover more effectively.”

However, Lord Porter warned that the mutual would only be successful if enough local authorities joined the scheme.

A large number of councils had expressed an interest, he said. “The crucial next stage is for a sufficient number to come together as founding members to explore the option of mutuality and the practical steps needed to help a local government mutual open for business.”