Last updated: January 23, 2014 7:36 pm

Six UK recruitment companies face mis-selling probe

Shadow business secretary Chuka Umunna

Shadow business secretary Chuka Umunna

Ministers are to investigate Labour claims that six high street recruitment companies allegedly encouraged tens of thousands of workers to buy unnecessary personal accident insurance.

Chuka Umunna, shadow business secretary, said six companies – Blue Arrow, Staffline, Acorn, Taskmaster, Randstad and Meridian – had been involved in selling personal accident insurance to agency workers at a profit. He said the accident policies were often not needed as workers were already covered by their employers’ insurance.

Responding to the allegations in the House of Commons, Vince Cable, business secretary, promised to investigate the claims and did not rule out a broader inquiry. If employers had misled workers into buying personal accident insurance, taking their pay below the minimum wage, “it would be indefensible, and I think it is unlawful”, he said.

Recruitment agencies denied wrongdoing. The Recruitment and Employment Confederation, which represents all six companies, said many trade unions offer similar products.

“Employment agencies are not doing anything wrong by offering workers the opportunity to purchase accident insurance,” the confederation said. “It’s a product that many other organisations offer to their members, including trade unions.”

But David Greene, partner at Edwin Coe, a class action lawyer, said the Financial Conduct Authority (FCA) should step in immediately to stop the practice. “Agencies do this to boost their profits and as a business. We have previously written to the FCA to seek an investigation because we believe that agencies must be regulated in the sale process.”

One adviser to the business secretary said on Wednesday that the department needed to look at the evidence given to the Labour team before taking a view on whether to launch a full-blown inquiry into insurance mis-selling by employment agencies.

“We are concerned about this, there have been several mis-selling scandals and the business secretary is always on the side of businesses and consumers – these will be investigated and dealt with,” she said.

British banks have set aside about £15bn to compensate customers for mis-selling them payment protection insurance which they did not need or want, in the biggest such scandal to hit the sector.

Unscrupulous agencies should not be banking on the ignorance of those on their books to force them to sign up for costly insurance premiums they neither need nor can afford

- Frances O’Grady, Trades Union Congress

Acorn said the company “wholly rejects” the allegations. “No temps are enrolled in the scheme if the deductions would take them below the national minimum wage,” it said. “If such a temp asked us to do so, then we would decline.”

Blue Arrow said it takes “the welfare of people engaged through us very seriously.

“We believe that the key is transparency. If workers are offered the opportunity to take out insurance they should do so with the full knowledge and understanding of its cost and benefits. However, if there is any situation where we believe workers are unknowingly sold insurance or any other services, we will act immediately.”

Recruiters argue that although staff are covered by their employers’ liability insurance if they have an accident either on the way to or at work, this requires proof that the incident was the employers’ fault. Personal accident insurance pays a replacement income much more quickly because it does not matter who caused the accident.

Frances O’Grady, general secretary of the Trades Union Congress, said a cut in the number of government inspectors policing agencies might mean more incidences of agency workers being overcharged for services they did not need. “In most cases workers will be covered by their employers’ workplace insurance policy but many may not know this.

“Unscrupulous agencies should not be banking on the ignorance of those on their books to force them to sign up for costly insurance premiums they neither need nor can afford.”

Additional reporting by Alistair Gray

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