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20 September | Adam Leach
Buying as part of a mutual in the university sector could increase as a result of rising insurance costs, according to one mutual.
Allan Guest, chairman of UM Associated (UMAL), a mutual that buys insurance for 112 universities, warned that “catastrophic losses” experienced by the insurance industry because of earthquakes, the tsunami and extreme weather in the past year means insurance rates in the UK will increase. He was speaking at a conference on university purchasing in St Andrews, Scotland.
Susan Wilkinson, director of UMAL, said a recent ruling by the Supreme Court means universities can now buy insurance as part of a mutual without completing a tendering process, which should lower costs.
The ruling, which was made in March, concluded a long-running legal saga over whether mutual groups were required to follow EU tendering procedures when buying insurance. When Brent Council joined the London Authorities Mutual (LAML), Risk Management Partners (RMP) took legal action on the grounds that Brent had not submitted an open tender. But following an appeal to the Supreme Court by Harrow Council (which was affected as a member of the mutual), the decision was reversed, allowing public bodies and universities to buy insurance as a group without tendering.
“What we have now,” said Wilkinson, “is certainty about the legalities of this exemption for our mutual.”
She believes the practice could now spread to other areas of purchasing. “Other shared services initiatives in the sector will no doubt develop quickly at a high level.”
Wilkinson also explained that the presence of mutuals such as UMAL serves to drive competition across the insurance sector. She said: “Our competitors knew from the start that the mutual would take business away from them in both the broker and insurance market so they became very anxious about their service capability and their pricing.”