“DESPITE recent concerns and rumours across the insurance and construction markets, professional indemnity insurance is still being provided,” says Mark Cook from MC Plan and Site Services.
The last 12 months have seen a significant deterioration of the UK professional indemnity (PI) insurance market with a large number of insurers withdrawing and others seeking to reduce the amount of business they write with the knock-on effect seeing premiums increasing, significantly for some professions – including Approved Inspectors – and policy coverage being reduced.
So what has been the cause of such a rapid and significant change?
“One factor commonly held as a major reason is the Grenfell tragedy of 2017 as both this and the costs in making mid and high-rise buildings around the UK less vulnerable to fire will cost the insurance industry significant sums. However, the reality is that this is only a small part of the equation” says Gary Boome, Director of BM Property Insurance.
“Lloyds of London undertook a review of the insurance market in 2018 and this showed PI insurance generally to be the second worst performing area; added to Grenfell, a number of extremely large global PI losses and natural catastrophes detrimentally affecting underlying reinsurance markets, most insurers were left with an ultimatum to either develop a business plan that would return their PI business to profitability or they would no longer be allowed to provide PI. This led to a number of insurers withdrawing immediately, with those left having to continue with a very different strategy of sustainable pricing and disciplined underwriting” he added.
So what does this now mean for professional firms who need PI to trade? There have already been – and will be more – firms who are forced to close or lose contracts because they cannot secure the right PI cover or any at all.
In the AI arena, only three insurers are approved by the Government:
- NHBC – who only underwrite NHBC instructions, so this cover is not available to other AIs.
Which leaves only;
- Howdens, who earlier this year confirmed their underwriter was pulling out of the market, leaving them unable to offer these policies anymore.
- Griffiths and Armour are now the ONLY insurers, but RSA told them in the spring that they would not be taking on any new risk, ie. any clients coming across from Howdens. They won’t insure anything more onerous than the ACAI standard form of appointment, nor will they cover anything with cladding over 18 metres high as this is considered too high risk.
Firms have been advised to start their renewal process earlier than ever and be prepared to provide greater detail about their business and how they manage and mitigate risk. The more proactively they can do this, the more favourably they will be perceived by PI insurers.
Mark Cook, MD of MC Plan said: “Mindful of the problems other firms were facing, MC Plan and Site Services started our renewal process four months before renewal. Other firms have not been so successful and the LABC have been waiting in the wings for this to happen by circling like vultures, waiting to swoop in the event the AI doesn’t receive insurance, or the premium is too high for them. The Local Authority will then demand the work back from the AIs, saying they can’t then continue with the work as they’re uninsured, which is crazy as the LABC are also uninsured.
“Over the past few months, with the scaremongering that’s been going on, we have had to answer numerous questions from our insurers when looking to renew” Mark said.
“Questions that would not have been asked normally – which I can only attribute to the rumours and untruths that are being circulated in our industry. We have had confirmation recently from a building control surveyor employed by the LABC that they have been instructed to use the insurance situation associated with AIs as a marketing ploy to win work back’.
“In truth, as an independent AI company we have far more hoops to jump through than LABC; we are audited by the CICAIR (Construction Industry Council Approved Inspector Register) on a regular basis to ensure that we stay compliant with the Approved Inspectors regulations unlike the LABC building control departments. In terms of knowledge, experience and training are concerned, I have not only received – but also have delivered – far more training to my own staff since leaving the LABC than during the 15 years that I was working for them. All my assistants are either on, or have been on HNC Construction Management courses, or studied NVQ level 6 courses in Construction Management.
“MC Plan and Site Services have to be fully insured to practise the building control service, as opposed to the LABC who don’t carry any insurance and therefore are not culpable for negligence, I find it difficult to understand why anyone would want to engage with an organisation that provides no protection to either the developer or the householder when, on the odd occasion, things may go wrong.
“It’s been a challenging time for us in the office, with all the extra work created to get our insurance cover passed, but we are delighted with the outcome and are truly grateful to our insurers for having as much confidence is us as we do! Now, let’s get on with the business in hand…..” Mark added.
MC Plan & Site Services Ltd is a fully insured, award winning Independent Corporate Approved Inspector, licensed and regulated by the Construction Industry Council (“CIC”) to carry out building control throughout England and Wales.
For more information visit www.mcplanandsiteservices.co.uk or telephone 01202 744966.