The impact of extending the RPA to maintained schools

  • The Department for Education (DfE) has confirmed the Risk Protection Arrangement – currently open to academies and free schools on an opt-in basis – will be extended to local authority maintained schools
  • The move could have significant implications for schools and local authorities
  • We explore the wider impact of the DfE’s decision

The Risk Protection Arrangement (RPA) was launched in 2014 as an alternative to commercial insurance for academies, academy trusts and free schools.

Schools that elect to opt in to the RPA will be charged £18 per pupil in their grant funding. In return, risks such as material damage and business interruption are covered by central government funds. The Department for Education (DfE) says the scheme has helped to save public money and on 21 January, following consultation, it confirmed plans to extend the RPA to local authority maintained schools.

The decision follows a stark difference in responses to the consultation between respondents from the school sector community itself and local authority representatives. However, this is perhaps unsurprising, since the option of the RPA would simply provide more choice with no detrimental impact to the schools if they decide not to pursue it. Furthermore, it is not the schools which have ownership and responsibility for the buildings and staff.

Why is this so significant for local authority schools?

In its consultation, the DfE emphasises the potential upfront cost savings for schools that opt in. However, the RPA differs from commercial insurance in many important ways and extending the scheme to local authority maintained schools could have serious implications for the sector.

Schools and local authorities will now need to consider whether to continue to protect themselves through conventional insurance or the RPA, and we would encourage them to consider the following questions.

1. Will schools get value for money?

The DfE proposes to extend the RPA at the current cost of £18 per pupil, promoting savings. However, this is not comparable to current arrangements whereby the combined power of the local authority and insurer provides a range of added value services, including specialist risk management advice and support, claims management, and access to the insurer’s full proposition. Insurers clearly have years of experience in this area.

We welcome the option of local authorities being able to set the operating model and continuing to be able to provide their vital layer of expertise – however, this service cannot be provided without cost and the DfE notes it is reasonable to expect this to be recouped through a service charge to the school. Once this is added to the £18 cost per pupil, it is questionable whether the expected savings will in fact be realised.

In part, the cost savings will be driven by the fact that the RPA does not pay Insurance Premium Tax (IPT), the tax on all general insurance premiums that insurers are obliged to pay. With the government promising increased spending in other areas, it should perhaps be questioned how the loss of income from IPT will be covered and if this will hit the public sector’s funding elsewhere, resulting in poor outcomes for the wider community.

Furthermore, because the RPA is not an insurance policy, does this therefore contradict existing local authority requirements for any leased buildings to be protected by an insurer?

Whilst a local authority’s spend on property insurance may reduce if schools are removed from its portfolio, it is unlikely that the spend on casualty premiums, such as public liability, will reduce. This is because highways, children’s services and social care are the main areas of risk and premiums reflect this. As a result, councils will have to meet a greater share of the cost of premiums in addition to those covers not supplied by the RPA, such as engineering and motor.

2. Where will schools turn for risk management support?

Local authorities carry out a programme of surveys of their schools as part of the proposition, to inspect premises and make recommendations for improvements to better manage the risks. Should schools exit this programme, it raises questions about how standards will be maintained or improved in the future.

The RPA has indicated it already provides such services to academies and will work with local authorities to improve their risk proposition. Schools should seek to understand the specifics of how the RPA offering develops and compares to insurers. For example, how do the RPA’s building surveys compare to the detailed risk survey carried out by an insurer? Insurers have a proven track record that should not be overlooked – with expertise being provided in specialist and sensitive areas such as safeguarding, as well as catastrophic loss. For Zurich Municipal, this expertise goes beyond on-hand advice, and expands to practical solutions such as the provision of our Safer Schools App, included within the premium you pay.

Local authorities should be explicit about the breadth of their insurance service and the associated cost breakdown.

3. Who will stand up for the sector?

Zurich Municipal has a track record of acting in the wider interest of local government and schools in supporting agendas such as sprinklers in schools, children’s safeguarding through the Safer Schools app, modern methods of construction, school arson and the Ogden rate. What is the RPA’s track record on these issues, and how does it propose to support local authorities and schools?

Zurich Municipal also directly supports customers by intervening to defend points of principle in court and incentivising good risk management – investing in improving the overall sector risk. Without this, the risk profile of maintained schools may diminish, resulting in short-term savings leading to long-term poor value for money, or even adversely impacting the cost directly.

4. What would be the impact on the mechanics of your organisation?

If maintained schools in your local authority joined the RPA, a decision would be required around the operating model, and whether your insurance and schools teams would continue to operate. Could it mean staff redundancies? If so, could you be exposed to potentially significant additional costs? You could also potentially lose skills and expertise needed in other areas of your organisation to support wider risk agendas.

The implication on your cashflow following a claim should also be considered, and combined with the risk of dual insurance or cover gaps, this could create long-term complexities to manage.

An urgent challenge for the entire sector

We believe the DfE’s announcement will have wide-ranging implications for the sector as a whole, and may present challenges that offer no easy solutions. From both the DfE’s analysis and our own, insurance experts within local authorities are not wholly supportive of the idea of extending the RPA to their maintained schools; the disparity between local authority thinking and that of their schools now needs to be addressed.

We would encourage local authorities to work with their schools to think carefully about the needs of the sector before making decisions around their future protection.

The RPA announcement is a lengthy document and we will continue to work to wholly understand the differentiation between insurance and the RPA discretionary scheme.