Major reform of local government is underway in England, with the government seeking to create simpler structures that deliver better outcomes for residents, save money, and improve local accountability.
The Government set out its proposals for reform in the English Devolution White Paper, which was published in December 2024. This includes two key initiatives:
Devolution – the transfer of powers and funding from Whitehall to create regional strategic authorities with an elected mayor. These will cover populations of 1.5 million plus.
Local government reorganisation – new unitary councils to achieve efficiencies by combining existing authorities and ending the two-tier county and district council system. These will have populations of at least 500,000.
Six areas – Cumbria; Cheshire & Warrington; Norfolk & Suffolk; Greater Essex; Sussex & Brighton; and Hampshire & Solent – have joined the Government’s Devolution Priority Programme and mayors will be elected by May 2026.
The Government has also invited all councils in remaining two-tier areas and small neighbouring unitary authorities to develop proposals to become new unitary councils. Initial plans are expected in spring with full proposals later this year.
Insurance implications
Bringing together authorities to create these new authorities requires careful attention to the insurance implications. Each existing council will have its own cover arrangements and risk profile: factoring these differences in, and understanding how they will shape the new authority’s requirements is essential. In addition, there will be requirements to cover the activities of shadow authorities as the new organisations take shape.
At Aon, we have experience of supporting local government reorganisation projects. These are our tips on what to consider when undertaking this project:
Tap into your expertise
Bring together everyone with risk or insurance insight to understand what’s involved and establish a clear plan. This might include property and fleet teams with risk management knowledge as well as insurance managers. Expertise is often lost during a restructuring expertise so it’s essential to do this at the outset.
Use data to drive decisions
Data is fundamental to understanding what you have and what you will need for the new authority. Ideally, you should look to collect 10 years of data to be able to conduct claims analysis and help determine the new insurance programme. Cleanse’ the data too: if claims experience includes claims from activities no longer undertaken, remove them to present a ‘go-forward’ position. It’s not always easy to gather this data, or hold it in the same format, so prioritise this exercise and allow plenty of time.
Model behaviour
Different organisations will have different cover limits, excesses and terms and conditions. As an example, a county council might have a £250,000 excess while the district council only has a £1,000 excess. Modelling potential claims for the new authority on different deductible levels will provide insight into the most appropriate excess – and could potentially save money.
Present your best side
Quality and detailed underwriting information is key to driving the best outcome with insurers. It takes time but collecting information on the construction and occupation of buildings will help to secure the best terms on property insurance while details of risk management strategies across different activities such as housing, highways and adult services can improve a liability underwriter’s view.
Create harmony
Identifying the most appropriate risk management strategies for the new authority is also important. It’s unlikely that each of the underlying councils provide the same services nor face the same risks: understand what works and why before developing strategies for new authority.
Be prepared for transition
Bringing together several authorities’ insurance programmes will be challenging. As well as grappling with terms and excesses, you’ll probably face different renewal dates. Some contracts can be novated or extended on a short-term basis or it may be simpler to extend existing cover for the new authority while other insurances run in the background.
Engage insurers
Bringing together councils with different profiles and approaches to risk management can make underwriters nervous. Talking to insurers throughout the process and outlining the combined authority’s risk plan can help to calm nerves and achieve the best terms when it goes to tender.
Allow for historic claims
Becoming a new authority doesn’t mean you shed the long-tail liability. Claims for occupational diseases and historical abuse can be brought years after they occurred so it’s important to determine how these would be allocated. It may also be worth establishing a fund to cover these historic claims, especially where individual councils have historically self-insured a portion of the liability risk.
Factor in plenty of time
Combining the insurance programmes of two, three or more authorities takes time. Collecting the data and claims analysis can each take a few months and you will also need to prepare to go to tender. Allowing 9-12 months will ensure you get the most out of this exercise.
Review, review, review
Bringing together different authorities’ risk management and insurance programmes can take several years to settle in. Regularly reviewing how it’s performing and whether new risk management strategies are required is a must.
Think long-term
As well as the opportunity for premium savings on day one following consolidation, there is also the potential for longer-term savings once underwriters have gained greater confidence in how the programme and risk management strategies are performing.
