“Dubious arrangements for agencies” see top employment agencies allegedly mis-selling insurance to thousands of low-paid workers, according to shadow business secretary, Chuka Umunna.

The government is to investigate claims that some agencies are selling unnecessary personal accident insurance to workers who are already on Minimum Wage.

These policies are often not needed as the individual is already covered by the employer’s insurance. The employment agency will usually make a margin on the policy.

Six of Britain’s top employment agencies were named by shadow business secretary as being involved in mis-selling: Blue Arrow, Acorn, Taskmaster, Randstad, Meridian and Staffline.

A specialist company, Gee 7 Group, was also named for putting the policies together.

Mr Umunna accused the agencies of “profiteering" out of the practice.

The business secretary, Vince Cable, said that the practice would be “indefensible” and “unlawful”. He added that the companies would be investigated, and that he would also consider a more broad-based enquiry.

A useful service?

The Recruitment and Employment Confederation (REC) said the companies concerned were doing nothing wrong and were simply “offering a useful service”.

The REC's director of policy, Tom Hadley, said many trade unions offer similar products and that employment agencies are not doing anything wrong by offering a similar service.

He said that "personal accident cover can be appropriate for workers in high risk sectors such as rail and construction and can also cover them for accidents off-site that would prevent them from working".

“As the professional body for the recruitment industry in the UK we require all our members to abide by our code of conduct which requires them to be open and transparent with their workers.”

Likewise Blue Arrow, one of the employment agencies named, has pointed out that the insurance is “offered”, not “sold”.

A spokesman from Blue Arrow said

"Our consultants are fully trained and regulated in line with the Financial Conduct Authority's guidelines and are not paid commission as personal accident insurance is not a sales initiative," a spokesman said.

"We do not believe that any of our employees take out personal accident insurance without fully understanding the benefits and cost.”

Gee 7 has denied being involved. Jon Pardoe, Managing Director of Gee 7, said that “such cover provides limited benefits and is in most cases unnecessary”. 

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