Compensation culture – Could it be a good thing?

shutterstock_132429839‘Compensation culture’. In recent years these two words have become joined at the hip. They conjure up a society of serial claimants, egged on by shyster lawyers to adopt a “where there’s a blame there’s a claim” approach to life. However there’s some debate whether this compensation (or claims) culture actually exists, or whether, as Lord Young suggests, it is more a problem of “perception rather than reality.” In this short post, part of which originally appeared in RoSPA’s OS&H journal, we look at the issues surrounding compensation, as well as exploring whether claims for occupational injury and ill health could actually help to drive positive health and safety changes.

Today’s workplace

According to HSE statistics, work-related injury or illness cost society £14.2 billion in 2012/2013, with the major costs to employers arising from productivity costs (equivalent to the occupational/statutory sick pay payments made) and Employers’ Liability Compulsory Insurance premiums.

Since 1969, when the Employers’ Liability (Compulsory Insurance) Act came into force, UK employers must have insurance in place to enable them to meet the cost of compensation for their employees’ injuries or illness.

Is the fact that firms are not paying each claim directly from their own pockets a disincentive to improve workplace health and safety? Jonathan Wheeler, president of the Association of Personal Injury Lawyers (APIL), does not think so: “There are financial incentives [from insurers] in place to ensure that employers take the necessary steps to reduce accidents and ill health to the lowest possible levels. Employers with a poor record may end up with large excesses or increased [insurance] premiums.

“I think that these days, insurers take quite a big role in helping their clients to make sure that accidents and negligence are at their lowest level.

“Responsible employers will want to minimise negligence anyway. But I think it is true that, sometimes, some employers need to be shamed or hit in the pocket to make necessary changes to reduce injuries to the lowest level.”


One benefit attributable to the ‘claims culture’ is that each successful claim saves the country money.

shutterstock_249974521How? The Government’s Compensation Recovery Unit (CRU) monitors each common law claim and recovers any government benefits already paid to the successful compensation claimant because of their injury or illness. In the spirit of “the polluter pays” principle common in environmental law, the CRU recovers the benefits paid from the employer, and we are not talking about a trivial amount. In 2014/15 the CRU successfully recovered nearly £74 million from employers’ insurance for the taxpayer.


Any financial compensation that injured or ill workers can get is always welcome but evidence shows it is not excessive. Despite the occasional ‘jackpot’ headline, average compensation awards are not measured in millions of pounds or even hundreds of thousands, 75% are for less than £10,000 and the majority of these are less than £5,000, and no doubt those awarded justifiable compensation would always rather not have had the injury/illness than have the money. In the words of one Montana miner diagnosed with mesothelioma, “however much the companies paid, they will never have to pay like we did”.

The way ahead?

Compensation claims generate vast amounts of information, if only because defendant and plaintiff need the clearest and most detailed picture possible. The U.S. is currently pioneering an initiative to exploit this data to the full.

The Centre for Workers’ Compensation Studies (CWCS) was established in 2013 by the country’s National Institute of Occupational Safety and Health (NIOSH) following research into ways workers’ compensation claims could be used to reduce occupational accidents and ill health. Since then it has been analysing data from work-related claims.

But what can compensation data tell us that health and safety statistics generated by health and safety regulators such as the HSE cannot?

“Compensation data include an unstructured narrative that describes how the injury/ illness occurred,” explains Steve Wurzelbacher, director of the CWCS. “The narrative acts like a short story and if a large sample of claims is read within an industry, ideas for prevention develop that may never be possible if you are simply looking at coded data.

“Compensation data are also one of the only sources of injury/illness data that provide information on the cause of injury and resulting diagnoses and cost and treatment. There is a tremendous prevention potential to tap within workers’ compensation data.” This approach is already bearing fruit, not least because it also encourages cooperation between compensation insurers and organisations to reduce injury and ill health.

But compensation claims don’t just provide data, they can highlight health and safety issues. This can be particularly important for emerging issues, or cases where the issue in question is not clear cut. A current example of the latter is the contamination of aircraft cabin air by organophosphate-containing engine oil. Campaigners claim this contamination is affecting the health of aircrew. The industry denies this. Compensation claims may soon help to resolve this impasse by subjecting the issue to the glare of publicity. In June this year the union Unite announced legal action against UK airlines on behalf of 17 crew members claiming ill health due to inhaling contaminated cabin air. This in turn could trigger a more stringent investigation. accident (the dictionary project)


It is difficult to quantify the effect of compensation claims on health and safety in the workplace. However, beneath the surface, insurance companies almost certainly try to bring influence to bear by offering better premiums to employers with fewer successful claims against them.

Perhaps the most persuasive case for the positive effects of compensation claims comes from the fact that insurers and business associations who issue bleak warnings about the ‘compensation culture’ also recognise the importance of good health and safety practice in preventing these claims. As one said: “The best approach is prevention. Doing things properly need not be as onerous as many employers fear.”

This is an abridged version of an article by Nick Cook, which originally appeared in RoSPA’s Occupational Safety & Health Journal. For more vital health and safety guides, facts and advice, sign up to SafetyMatters, RoSPA’s free fortnightly newsletter and receive our collection of free original e-books!


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