From September 2014 the DfE introduced the risk protection arrangement (RPA). You may be forgiven for thinking that RPA had something to do with raising participation in learning beyond the age of 16… but of course, in our current world acronyms can be interchangeable if needs be.
The driver for the development of the scheme is cost, driven by the premise that risks covered by UK Government can be more cost effective than insurance taken out by individual academy trusts. From my viewing position, economy at purchase does not translate into value for money when in a crisis. I would rather weigh the ability of the insuring organisation to provide cohesive, wide ranging and quality support when it is needed.
Current RPA membership has 661 members. One can assume that such members have satisfied themselves that their membership of RPA will not only improve their current insurance arrangements but also avoid the sometimes complex and time consuming procurement of commercial insurance cover.
Dotting the ‘i’s
The large number of academies who have not joined the scheme could be a combination of those academies tied into their existing insurance arrangements and others who have decided that their commercial insurers provide long term sustainability to their protection. Although the RPA scheme signposts a third party administrator when making a claim, commercial insurance providers have a clearer view about who will deal with an academy trust on a day to day basis when there is an emergency. I would argue that a depth of education risk protection experience would add value when support is provided. The third party sign posted by the DfE identifies 200 UK based clients in retail, leisure, manufacturing, transport and government and revenue of $400 million dollars. It makes no claims about quality of service or coherence in an end to end process. Their role is described as monitoring claims and advising on compensation levels.
There must also be a question as to whether significant costs arising from an emergency would be met up front, as with a third party commercial insurer or, in the case of RPA, initially by the academy trust and then reimbursed. In the DfE guidance they describe a third party monitoring claims through to completion. I would want assurances that the cost of project management and the coverage of interim and up-front payments were a feature of any scheme from which we wanted support at our time of need.
A bespoke insurance arrangement enables an academy trust to ensure that all of the aspects of its operation which require cover are included in their insurance arrangements. If an academy trust was seeking commercial insurance around the boundary of cover provided by the RPA scheme, there is no evidence that this would not increase the costs of such cover and may lead to disputes between the third parties when claims are made.
I was given to understand that the market is the answer to most problems. It is at the heart of the drive to a system led school system but it appears is not to be at the heart of the strategy to insure those schools. If a proletarian scheme of collective purchasing and cost control is seen as the best fit in this market, a quasi-nationalisation of academy insurance, are we soon to see perhaps the nationalising of our schools energy and other utility procurement? Perhaps also a renationalisation of car manufacturing, state transport and…?
The RPA: A Summary
The Department for Education (DfE) describes the Risk Protection Arrangement (RPA) as “an alternative to insurance where losses that arise are covered by UK government funds”. It is effectively an alternative, low-cost insurer. As with any purchasing decision that is based on price alone, you get what you pay for, and there are inevitably limitations in the scope of cover and services provided.
However, the greatest issue is one of future uncertainty:
1. If there is no Contract Certainty, the fund could be open to price fluctuation and subjectivities when it comes to the use of the money within it.
2. Initial indications are that take-up will be low. Possible consequences of a lack of “critical mass” could include price change, cover restrictions, service reductions and ultimately legislative change.
3. Whilst the RPA guarantees rates for a 2-year period, most insurers are offering 3–5 year deals with Contract Certainty. Much like fixing a mortgage, schools may well be better off in the long-run paying a slightly higher rate but for a guaranteed fixed premium for a 3–5 year period. If the hypotheses above prove true, those schools that join the RPA may find themselves subjected to a price hike after the initial 2-year period.
About the Author
This article has been produced by Gareth Dawkins on behalf of the Independent Academies Association (IAA) with input from Baker Tilly Insurance Services.
Gareth Dawkins is Vice Chair of the IAA and Executive Principal of Bradford Academy. Gareth chairs the IAA Finance and Funding sub-committee and represents the Association on all funding related issues as with the EFA, DfE and beyond.
Mark Taylor is Head of Baker Tilly Insurance Services Education Team and has 25 years’ experience in the Insurance industry. As part of his Business Development responsibilities Mark heads up the Education Sector team and has dealt with a wide variety of Educational establishments.