Are academy conversions creating opportunities for insurance companies to fleece the taxpayer?
Local Authority schools pay insurance as part of a block policy in order to achieve economies of scale. Once a school becomes an academy it is responsible for its own insurance.
Using the Freedom of Information Act we have gathered evidence that shows that insurance companies are using academy conversions as an opportunity to charge double, treble and even quadruple costs.
Shockingly this does not disadvantage the academies themselves because all the cost of the insurance is passed directly to the YPLA and thus the taxpayer.
For example, a Suffolk school that recently converted said:
“Before conversion to Academy, insurance costs were £36,236 and after conversion increased to £57,435. The main reason for the increase is because the local authority had a block policy for all schools therefore the insurance company were able to reduce costs. It may be possible in the future for academies to join together and purchase a block policy and reduce costs also. Please note that insurance premiums are not paid from Academy funding but from the YPLA.”
Another academy responded:
Post Academy £63k”
Yet another stated:
“Our costs for insurance are expected to increase considerably after conversion: 2010/11 cost via LA £20,145 (excluding staff absence and maternity insurance). We anticipate as an academy the cost will be around £84,000. The reason for this is that our LA substantially under-insured the buildings (this was a planned decision as they self-insured a large percentage by agreement) so our buildings insurance was subsidised by the LA, also there are economies of scale in insuring a whole county of schools.
We are using the same insurer, Zurich as the LA I don’t know of another in the market for school insurance. At the moment the YPLA will refund insurance costs but I don’t know whether this position will last.”
Our Insurance costs pre-academy were: £8,305
£2,382 (Combined Liability)
£2,895 (Damage, Loss, Risk Pooling)
£200 (Hirers Liability)
Using the same insurance company, but obviously not through the LA, our insurance cost now is: £25,103.49
We are putting in more FOI requests. We are also asking if Local Authorities have seen a reduction in their premiums, and if so, by how much.
If this scam was repeated across the 1,o00+ schools that have become academies, the taxpayer could be paying millions more for school insurance. The Secretary of State for Education needs to come clean about the figures.