Policy decision

What do members of the insurance community really think about ACPO 2000? An innocent enough question, but the answers are far from simple. Before providing those answers, we need to take a look at the wider picture and find out where ACPO's Security Systems Policy fits in with the 'greater scheme of things'.

Britain's so-called 'invisible earnings' are generated largely from financial services of one kind or another, and are vital to our balance of payments. In essence, we buy imported, manufactured goods and 'sell' our financial expertise.

Today, Britain harbours a service-based economy. Financial services, including insurance, are at its heart. It's an economy based (historically, at least) on Lloyd's of London and others who have a proud tradition of navigating traders through choppy commercial waters – including the Napoleonic Wars, the two Great Wars, the recession of 1929 and, more recently, the depression which began in the late 1980s.

So much for history. What about today's reality?

Insurance as a principle is based on measurable risks. By their very nature, insurers hate 'going blind' into new areas. Prior to Tuesday September 11, the worse case scenario for aviation insurers was – reportedly – two jumbo jets colliding over a built-up area. Many businesses simply cannot trade without insurance cover of one kind or another.

The tragic events that unfolded in the US have had a huge effect on the global economy. Even prior to the cash flow problems we're now experiencing, whole fleets of jet airliners were grounded by the lack of any insurance as re-insurers (who assume the 'top layer' of risk) suddenly recalculated their risks and repriced accordingly.

   Let's now go back in time once again, but not too long. Just a few years ago there was a major consolidation of the UK insurance market. Royal and Sun Alliance merged their respective operations, likewise Norwich Union and Commercial Union. A sure sign that conditions were nothing less than difficult. At the same time, Lloyd's saw its 'names'– those individuals who provide the risk capital – reduced to 2,500, less than half the usual number.

As 'names' disappeared, so did some of the syndicates, each specialising in certain areas. In the specialist field of combined liabilities for security installers, for example (including public liability, failure to operate and wrongful advice), after years of stability insurance rates began to double almost overnight. Key underwriters decided they no longer wanted the risk – at any cost.

Insurers' liability to underwrite business is tightly controlled by the reserves at their disposal. Given that some of these reserves are in shares, any significant fall in the value of shares will reduce capacity still further. If policy prices were to rise by 100%, then the number of policies that can be written reduces by 50%. Insurers are then faced with the unpleasant task of having to refuse business. Logically, they turn away from the less attractive risks altogether.

Alternatives are few. Manned response is the most obvious, and some insurers may well settle for it ... Better physical security also has a part to play – but before the problem arises!

Cue ACPO 2000, the background to which is around one million 'nuisance' (false) alarms each year that blight the commercial and industrial environment and – more importantly – waste police time. Time that is at a premium in any case.

Identifying the better risks
It's all very well for insurers to demand the end user meets the criteria for police response under ACPO, but if there are no resources to do so then that's the reality. Whether or not more resources should be allocated is a different matter, not to say a political argument. Insurers have to prefer that the police attend genuine breaches of security rather than chasing after the 'lost cause' of false alarms.

Police attendance on site is rightly associated with lower end user risks. As long as the police are able to provide a reasonably quick response then ACPO 2000 will help no end in identifying the better risks from the poorer ones. Poor risks will either be subject to no cover (almost unthinkable) or attract high premiums.

Ultimately, the training of alarm system users assumes an even greater importance. As is common knowledge, a great many false alarms are caused by end users who have little or no appreciation for the consequences of their actions. Losing police response will not be appreciated. Burglary cover may be reduced or removed altogether. Alternatives are few. Manned response is the most obvious, and some insurers may well settle for that.

However, during the course of investigating several burglaries I've come across one particular case where the manned security contract wasn't maintained and, as a result, effectively breached contract with the insurer – a situation that could well result in cover being withdrawn.

Better physical security also has a part to play, but in this case it's far better to put systems in place before the problem arises, not after the event. Businesses need to ensure that they do all they can so that they don't lose their ACPO links in the first place. Hence the need for end user training. Anyone who is new to working with a particular alarm system should be fully-trained not only in its operation, but also in the prevention of nuisance alarms.

Advice to end users from the insurance fraternity is straightforward. Do all you can to prove that your properties are better protected than the average, and train staff to be fire and security conscious. And expect the price of fire alarms supplied by your installers to rise. Insurers are generally very wary of fire system installers, more so now than at any time in the past. In some cases the premiums are trebling, and this will reflect itself in end user charges.