National Security Inspectorate

Risk Management - Insurer's Perspective

Steve Clark, of Royal & SunAlliance and Chairman of the Association of British Insurers Crime Panel, tackled a number of "hot potato" issues head-on in his presentation at the National Security Inspectorate's Conference in June 2004 at Warwick University.
Speaking about current risk management topics, in his role as the company's Crime Technical Manager, Steve warned about the EU Services Directive's potential to undermine upcoming licensing, commented on the trend towards the use of remotely monitored CCTV, addressed the introduction of European intruder alarm standards and their accompanying risk assessments, and expressed serious concern over parts of the Chief Fire Officers Association's policy on response to remotely monitored fire alarm systems.

Kicking off his presentation by considering the insurance benefits derived from NSI's supervisory regime, Steve noted that insurers and policyholders alike have benefited from the improved standards of product and service that NSI has helped to foster through its inspection schemes - one readily measurable improvement being the considerable reduction in false-alarm rates, thanks partly to the compliance of installers with the Association of Chief Police Officers Security Systems Policy, which NSI has supported and policed.

Manned Security Fears

Speaking in the context of licensing now under way within some sectors of the security industry (such as for door supervisors, and contract manned security officers from spring 2005), Steve also echoed serious concerns expressed recently by the British Security Industry Association over the draft EU Services Directive, which "threatens to undermine the laudable efforts of the Security Industry Authority".

The Directive appears to permit security contractors from another member state to trade in the UK without meeting the new licensing requirements of the Security Industry Act, provided they meet whatever qualifications are required in their country of origin. The Association of British Insurers has written to the DTI, proposing that the security and fire industries be exempted from the Directive when implemented.

Fire Sector Upheavals

Turning to the present Fire Service Review, he told the audience at Warwick University that any proposals to reduce or relocate fire service resources according to the Integrated Risk Management Planning approach introduced by the Fire Service Review will mean insurers having to reconsider their maximum "acceptance limits" in relation to properties that have become "remote risks". Steve defined a remote risk as one where adequate fire brigade resources - backed by sufficient water resources at adequate pressures judged in relation to the accessibility and nature of the risk - cannot reasonably be expected to be brought into use within 15 minutes of a call being received. An acceptance limit, he added, determines how much (in monetary terms) the company would normally be prepared to insure for a particular property.

In response to the Chief Fire Officers Association's proposed policy on response to remotely monitored fire alarm systems, Steve repeated the Association of British Insurers' serious concern over the stated principle that flexibility of response should be given exclusively to direct resources "where the risk to life and injury is greatest". Insurers contend that economic, social and environmental concerns must also be prominent in these considerations, as they impact very significantly on the prosperity and well-being of local communities, he told the conference.

In a nutshell, insurers regard it as too simplistic for any Fire Service to adopt an automatic policy of reduced response following a prescribed number of false alarms. They believe the judgement of risk is based not only on the probability of an alarm being genuine, but also on an assessment of the impact of a real fire - in economic as well as life-safety terms. For example, a serious fire at a factory that employs a high percentage of local residents would have a significant detrimental effect on the local community and local economy, and this should be considered when determining response, the NSI conference audience heard.

Subjects to Alarm

Moving on to current theft issues, Steve covered the introduction of the new European Systems Standard EN 50131-1, which lays down a structured risk assessment procedure for designers of intruder alarm systems. A properly completed risk assessment should lead, in turn, to an appropriately graded and designed system. Insurers will expect alarm installers, when designing a confirmable alarm system, to take into account the need to detect intruders, as well as the need to have confirmed that detection, before they reach the target. Steve underlined that insurers will be looking to NSI, as part of its inspection programmes, to ensure that installers carry out risk assessments professionally as part of the grade selection and system-design process.

In principle, a more flexible and responsive approach could be further accelerated if the intruder alarm industry demonstrated that it has risen to the challenge of risk assessment. If there was a much closer alignment between the alarm company specification and the insurance surveyor's minimum requirements for a risk, we might not need security surveys on smaller businesses and could then redirect some of our risk management effort towards other sources of loss.

On a related topic, he said variations in police alarm policy represent "a real problem for us, our customers and the alarm industry itself". Significant variations introduced by individual forces, particularly without adequate consultation, are "a growing source of frustration". If, for example, you purchased a conventional remote signalling intruder alarm in the Nottinghamshire force area ahead of the October 2001 Association of Chief Police Officers Systems Policy deadline, you will have to have it upgraded to a confirmable alarm by April 2005 to continue to be eligible for a police response even if the system has been false-alarm free.

He also warned about increasing use of commercial key-holding and alarm-response services: "As insurers, we are generally happy to see such companies attending in support of, or in place of, the key-holder's employees (provided they are NSI-approved, of course), but we would not readily agree to their use in place of police first-response, except when police response had been withdrawn as a result of false alarms, when it become a best available substitute."

Remote Surveillance

Steve Clark also addressed the burgeoning area of remotely monitored camera surveillance, almost a year on from publication of BS 8418 - the standard for detector-activated CCTV - which paved the way for police forces to treat BS-compliant systems in the same way as intruder alarms by issuing them with URNs (Unique Reference Numbers) (please see Issue 18 of NSI Network magazine for details; for a free copy call 0870 205 0000).

Giving an insight into the insurers' perspective on this recent development, Steve said that for Royal & SunAlliance the issues in evaluating any given system are mainly concerned with:

1. certainty of detection
2. quality of image
3. security and availability of signalling path
4. the quality of response

Steve wrapped up his presentation by praising the National Security Inspectorate's work: "They have a well-deserved reputation for insisting on the highest of standards and operating the most rigorous inspection regime. They continue to attract new applicants at an impressive rate, so there is clearly an appetite amongst security firms to be associated with this reputation.

"The new European intruder alarm standards offer a real opportunity for NSI to add yet another new dimension to the influence they exert in driving up standards of professionalism in the security industry. They are clearly in the best possible position to make a big difference in this area."

Source from an article written by The National Security Inspectorate. NSI is an independent, not-for-profit approvals body providing inspection services for the security and fire industries.