One of the more interesting questions that surrounds the prospect of thousands of students getting compensation for Covid (or strike) related complaints is about who picks up the tab.
On Radio 4’s PM, HEPI’s Nick Hillman suggested that it’s current students who will pay the price:
So what I worry about, and I really feel for that covid generation, and I do think they’re very hard done by as were school children, of course, at the same time. But of course, it will be current students often that end up suffering as a result of having to make these compensation arrangements.”
The Student Group Claim’s FAQ takes a different view, reassuring those who sign up as follows (my bolding):
Is it fair to expect my university to pay compensation? Yes, in our view. Covid-19 and to some degree the strikes were not universities’ fault, but the question is who should bear the risk of the damage they caused to students. In our opinion, universities are better able to bear that risk, for example by taking out insurance, and it is therefore fairer for universities to pay compensation than it is for students to be left paying for services which they do not receive.
Universities do take out professional indemnity insurance, which can cover claims arising from alleged failures to provide professional services to the required standard – and that can include claims that teaching, supervision, facilities, or academic services didn’t meet contractual or professional obligations. Student complaints alleging breach of contract, negligence, or misrepresentation can fall within the scope of professional indemnity cover.
But what neither Hillman nor the Student Group Claim site address is whether that insurance actually covers these particular claims – and what it might mean for students if it does.
The coverage question
Back in March 2021, specialist education insurance lawyers Beale & Co published a piece called Please OIA, may I have some compensation…? that made a critical distinction:
Whilst fee refund claims are likely to be excluded from most Professional Indemnity policies, claims for compensation (including any awards made by the OIA) based upon poor or inadequate teaching are likely to fall to be covered. A review of the most recent OIA decision suggests that Insurers may see a rise in these types of complaints over the next few years.
Fee refunds excluded, then, but compensation for inadequate teaching probably covered. There’s a further wrinkle, though. Most PI policies include what’s called a contractual liability exclusion, designed to exclude express liabilities the policyholder has assumed under its contracts.
The Student Group Claim has been framing its case as breach of contract – “universities breached their contracts with students” – which is the category that often falls outside coverage.
The Covid crunch
Whatever the technical coverage questions, universities’ insurers were clearly spooked by the pandemic. A Queen Mary University of London paper presented to its Audit and Risk Committee in October 2020 – Insurance update 2020-21 – suggests the market had shifted.
Its professional indemnity premium increased from £22,651 to £88,034 – nearly a fourfold increase. The paper explicitly attributed this to:
…sector wide concerns regarding professional indemnity cover in light of potential ‘failure to educate’ claims arising from campus closure and movement of courses to virtual and remote learning and logistical difficulties.
Also issues arising from industrial action, a more litigious student population and the impact of COVID on course availability and the financial viability of HEIs have added to underwriter’s concerns which is then reflected in their calculations.
That phrase – “failure to educate” – doesn’t seem to be something QMUL invented for the pandemic. It’s standard professional indemnity terminology.
Hiscox’s PI policy examples include “a student fails to achieve target grades and parent blames tutor for failure to educate.” SA Law defines failure to educate claims as falling into two categories – failure to diagnose special educational needs, and teaching that was inadequate. The terminology was already there – Covid just made insurers very worried about it.
At the same time as premiums were rocketing up – pricing in the risk of “failure to educate” claims – insurers were also narrowing their coverage to exclude exactly those claims.
Lloyd’s Market Association issued LMA5391, a “Coronavirus Exclusion” clause, in March 2020. The wording is comprehensive:
“This Insurance does not cover any claim in any way caused by or resulting from: a) Coronavirus disease (COVID-19); b) Severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2); c) any mutation or variation of SARS-CoV-2; d) any fear or threat of a), b) or c) above.
Patrick Davison, LMA’s deputy director, explained the rationale:
Covid-19 was clearly becoming a major, major problem and the view was taken that unfortunately a risk of that systemic nature is frankly uninsurable.
UMAL, the specialist mutual insurer for universities and FE colleges, was explicit about applying Covid exclusions. Its note on main cover changes for the 2020/21 indemnity year states that UMAL imposed a Covid-19 exclusion for professional indemnity limits above £5 million, while “full cover is available up to £5m.”
So universities renewing policies from spring 2020 onwards likely faced a triple coverage problem – higher premiums priced for anticipated claims, Covid-specific exclusions narrowing coverage for those claims, and pure breach of contract exclusions potentially denying coverage anyway.
Whether the UCL settlement – announced confidentially with no admission of liability – was funded by insurers or by UCL itself is something we don’t know, nor do we know if the rest of the universities now served a pre-action letter are covered.
But phrases like “no admission of liability” and confidential financial terms are classic hallmarks of insurer-managed resolution.
What insurers require
If insurers are involved in student complaints – whether pandemic-related group claims or routine individual complaints seeking compensation – what does that involvement actually look like?
Professional indemnity policies are often written on a “claims-made” basis, meaning insurers can insist on being notified not only when a claim is formally made, but also when a university becomes aware of facts that could reasonably lead to a claim later. The threshold for notification tends to be deliberately low.
Keele University’s policy on additional earnings and consultancy includes what appears to be a practical PI guide, telling staff to contact the Payments and Insurance Manager “immediately” when they become aware of “a potential claim or a circumstance that could give rise to a claim.”
It defines “circumstance” to include an intimation by a third party – whether expressed or implied – of an intention to claim, criticism of your performance where it may give rise to a financial loss, and your discovery of a service or action which may fail to meet the standards required and could cause financial loss, even if your client is unaware.
A student submitting a formal complaint saying “I paid for in-person teaching, I got online, I want compensation” would appear to meet all three of those criteria.
The University of Oxford’s liability insurance guidance to departments is explicit about what happens next:
Do not admit liability for any incident. Do not provide any documentation to the claimant or their representative.
Those instructions flow directly from insurer notification and conduct conditions. And Oxford isn’t unusual. Gallagher’s Professional Indemnity Guide for Higher Education Institutions (May 2022) puts it this way:
We would recommend that this guidance is shared with any colleagues within your institution that could find themselves dealing with a complaint or contract breach and that they are aware of the importance of reporting circumstances to insurers – and to do so within stipulated timescales.
It continues:
We would recommend that departments involved in handling and managing disputes and complaints are made familiar with your Professional Indemnity cover and how it operates. This could include ‘scenario testing’ for various types of incidents and at which point to escalate and notify insurers.
Standard policy conditions typically require that the insured must not admit liability without insurer consent, must have draft correspondence approved by insurers before sending, must not settle without insurer approval, must cooperate with the insurer’s investigation, and must allow the insurer to take conduct of the claim if they choose. As one industry guide puts it:
Never admit liability or attempt to resolve a complaint on your own, even if you are at fault. Let your insurer take care of it.
Let’s imagine the PI excess is £2,500, while public liability third party property damage is £2,000. Any complaint seeking more than those amounts would engage insurer interest above the excess. For complaints above that threshold – and OIA case summaries regularly show compensation awards of £5,000, £8,000, £12,000 or more – it’s potentially the insurer’s money at stake, not the university’s.
The insurer’s calculation is straightforwardly commercial. Defending a claim costs money – legal fees, staff time, the risk of an adverse judgment with costs – and at some point those defence costs exceed what it would take to make the problem go away.
An insurer might settle a complaint for £8,000 not because the university did anything wrong, but because fighting it to OIA and beyond would cost £15,000 in solicitors’ fees and management time. Equally, an insurer might refuse to settle a claim the university would prefer to resolve quickly, because conceding sets a precedent that increases exposure across the portfolio.
The point is that these decisions may not be being made on the basis of what’s fair to the student, or what’s right for the institution’s relationship with its students, or what the university would choose to do if it were spending its own money.
They may be being made on the basis of what minimises the insurer’s aggregate liability. Students have no visibility into that calculation – and neither does the OIA.
The transparency gap
The OIA’s Good Practice Framework is explicit about what fairness requires. It defines bias as:
…a tendency to treat one person or group, thing or point of view more or less favourably than another, especially in a way considered to be unfair…
…and notes that bias can be deliberate, but it can also be unintentional. Providers, it says:
…have a duty to act fairly which means that decision-making should be unbiased and should be seen to be unbiased.
The framework sets out a clear principle – that providers need to take steps to avoid not just actual bias but “the reasonable perception of bias.” They are also told to consider whether the involvement of a particular individual could, intentionally or unintentionally, affect the fairness of the decision, or whether the student might reasonably think that it might.
On who shouldn’t be appointed as investigators or decision-makers, the guidance includes anyone who has “a personal interest in the outcome of any decision being made.” It states that “it is a fundamental principle of fairness that no-one should be the judge of their own actions,” and that students:
…must have confidence that evidence will be gathered fairly, and that an investigator will look for information which supports either side of an argument.
The framework also emphasises transparency about who is involved. It says it will not normally be appropriate to keep the name of a person considering, investigating or deciding the complaint or appeal confidential, because that:
…would lack transparency and may undermine the student’s confidence in the process.
And it’s good practice to:
…give students an opportunity to raise concerns about the individuals looking at their case as early as possible so that the provider can consider whether the student has a reasonable basis for their concerns.
Nobody seems to have asked the obvious question, though. If a university’s response to a complaint is shaped by – or even drafted by – its PI insurer or the insurer’s appointed solicitors, does that affect the independence and fairness OIA expects?
Insurers aren’t just involved individuals with a personal connection – they have a direct financial interest in the outcome of complaints. They’re not neutral adjudicators looking for information that supports either side of an argument. They’re potential payers seeking to minimise liability.
The OIA framework recognises that complete independence isn’t always achievable and permits mitigations – talking to the student about what would help them have confidence in the process, or bringing in someone independent to oversee things.
But there’s a difference between a university having an institutional interest in complaint outcomes – which is inevitable – and a university’s complaint responses being defacto controlled by an external insurer whose financial exposure depends on the result. How would a student raise concerns about insurer involvement “as early as possible” if nobody tells them an insurer is involved at all?
On NDAs, the then Independent Adjudicator Felicity Mitchell said in March 2020:
NDAs are rarely appropriate in the context of student complaints. The potential for the use of an NDA to have a negative impact on the individual student involved has been clearly illustrated in recent media reports. NDAs or similar agreements should not be used as a tool to silence students or cover up serious issues.
But OIA guidance contains no reference to whether universities notify PI insurers of student complaints, whether insurer involvement affects complaint handling, whether university positions reflect insurer instructions, whether settlements are insurer-approved, or whether students should be told if an insurer is involved.
There’s a gap between how PI insurance formally works – notification requirements, insurer control of claims, approval of settlements – and how student complaints are publicly understood to work, where the university makes an independent assessment and OIA reviews the university’s decision.
Meanwhile, back at the ranch
What makes this especially uncomfortable is that throughout the pandemic, ministers repeatedly directed students to use individual complaints procedures rather than providing blanket refunds or regulatory intervention.
Michelle Donelan’s messaging was consistent and relentless. In January 2021, she tweeted:
STUDENT MESSAGE 3: If students think they aren’t getting quality, quantity & accessibility they should raise their concerns with their Uni via the complaints process. If unresolved, they can go to the Office of the Independent Adjudicator (OIA).
In her official letter to students in February 2021, published across university websites:
However, if you have concerns, there is a process in place. You should first raise your concerns with your university. If your concerns remain unresolved, you can ask the Office of the Independent Adjudicator for Higher Education to consider your complaint.
And in evidence to the Education Select Committee in April 2021:
If that is the position for a student, they should, first of all, make a formal complaint to their university and, if still unresolved, go to the OIA, the Office of the Independent Adjudicator… I can’t guarantee that if a student goes through that process it will lead to a refund. It has the potential to do so. A few weeks ago the OIA published about 20 case studies, one of which was a refund up to the value of £5,000.
And when the OIA’s annual report showed record complaints in 2022, Donelan responded:
I have been very clear that students deserve quality, transparency and value. Where students believe they are not receiving the high-quality experience they were expecting they have every right to raise a complaint with the Office of the Independent Adjudicator if they are not happy with the response from their university. Students deserve a fair deal and it is good to see this process working with compensation pay outs increasing to over £1.3 million and more complaints upheld than ever before.
So government actively directed potentially hundreds of thousands of students to make individual complaints, while refusing blanket refunds and never explaining what complaints could actually achieve or addressing consumer rights questions or funding compensation if complaints succeeded.
If universities were following typical PI insurance notification requirements, each complaint seeking compensation above the policy excess would potentially trigger insurer involvement – without students, government, or apparently OIA being aware this was happening.
Known and unknown
What remains unclear is whether universities routinely notify insurers of student complaints and at what threshold, how often insurers engage versus decline involvement, whether complaint responses are ever insurer-drafted or approved, whether the OIA has visibility into insurer involvement, whether Covid exclusions were applied to education PI policies, and whether settlements end up insurer-funded or self-funded.
None of this amounts to an accusation of wrongdoing – it’s a feature of professional indemnity insurance with potential implications for student complaints that haven’t been publicly examined. When a student complains and seeks compensation, they may be negotiating not with their university but with their university’s insurer’s claims strategy – and nobody’s told them.
Whether that gap matters in practice – how often it’s crossed, at what level, with what effects – is genuinely unknown. But we may be about to get a chance to find out.
OfS is expected to consult shortly on a version of Condition C5 – the ongoing condition that will require new providers to the register to “treat students fairly.” The current version, introduced in 2025, focuses on matters like fee information, course changes, and complaints procedures. But if “treating students fairly” means anything, it ought to mean transparency about who is actually pulling the strings on a student’s complaint and whose interests they represent.
If insurers are routinely involved in shaping university responses to complaints – approving correspondence, instructing legal strategy, controlling settlements – then students arguably have a right to know that. And if universities are required to tell students when their complaint has been notified to insurers, when responses have been insurer-approved, or when settlement offers require insurer sign-off, that would be a meaningful addition to the “treating students fairly” framework.
Universities might reasonably respond that insurance arrangements are commercial matters outside OfS’ regulatory remit. But the regulator already concerns itself with how complaints procedures operate – condition C5 requires providers to have procedures that are “accessible and clear” and to handle complaints “in a way that is fair and reasonable.”
If the reality is that complaints above a certain value are handled not by the university but defacto by its insurer’s claims team, that seems relevant to whether the process is “clear” and whether students can have confidence it’s “fair.”
If the answer to “who pays” is “insurers,” then students deserve to know. And if OfS is serious about treating students fairly, the regulator should probably ask.