Significant cost increases and the introduction of new restrictions on professional indemnity (PI) insurance are preventing companies taking on projects and could delay essential work on building safety. These were the findings of a pan-industry survey of over 1,000 firms carried out by the Construction Leadership Council and published today.
The results pointed to widespread incidence of companies having to change the type of work they do because of restrictions on cover, with a quarter losing jobs because of tough conditions and limitations being placed on them by insurance firms. Even though two thirds of respondents said that less than 5% of what they do is high rise residential, almost one in three were unable to buy the cover they wanted or needed.
The survey was carried out from mid-February to mid-March and received 1,066 responses from a mixture of consultants, contractors and specialists. They also ranged in size with half of the respondents from companies with turnover below £2 million and 10% over £50 million.
The results* revealed that:
• Over 60% of total survey respondents have some form of restriction on cover relating to cladding or fire safety
• One in three of total survey respondents have a total exclusion in place for cladding claims
• One in five of respondents have a total exclusion in place for fire claims
• Over a quarter of total survey respondents have lost jobs as a result of inadequate PI insurance
• One in three respondents couldn’t do remedial work if they wanted to
• Almost a quarter of total survey respondents have changed the nature of their work due to inadequate PI insurance.
• Majority of respondents buy £10m or less cover with very few buying over £20m
• Almost half of respondents had been declined insurance by three insurers or more
• Two thirds of respondents are carrying a claim excess imposed upon them by their insurers
• Premiums have increased nearly 4-fold at the last renewal, having doubled the year before; the average rate is 4% of turnover but one in five who gave figures are paying more than 5% of their turnover for their PI insurance
This issue has been building for a while now and is starting to loom as our next crisis. The fact that 44% of businesses across the sector have been refused cover is telling and whilst 29% claim not to have been able to get the cover they need, the concern from conversations we have and analysis of cover is that I doubt many have cover they would consider ideal. Premiums continue to escalate and policies are contracting, everybody is paying for cover, but it isn’t aligned and there seems to have been little engagement from the insurance sector to address specific concerns rather than generic perceptions. Insurance is a financial service, but it needs to be engrained in the industry itself, it isn’t a just service, it is part of the infrastructure of the sector – we need to take a much closer look, as a supply chain. We need to consider carefully the role of options like integrated project insurance and wrapping insurance round the entire supply chain, ensuring insurance isn’t just another contract that seeks to write out risk, but is a core part of how we responsibly manage this. We welcome this work from the CLC – FIS is exploring a number of options for our sector, building on our Product Process People framework and, if any companies or individuals are interested in getting involved in our focus group, let me know.FIS CEO Iain McIlwee
The survey results are available here
*For consistency all results are given as percentages of total respondents (1066), but some questions were answered by fewer respondents.