Contractors face insurance premiums hike
Contractors face an increase in insurance premiums as the insurance market “hardens” following the Grenfell Tower disaster and the greater regulatory scrutiny that has resulted from it.
That’s the warning from insurance firm JLT Specialty’s construction team, which has reported that insurers are scaling back on capacity or even withdrawing from the professional indemnity (PI) insurance market entirely.
Construction has benefited from affordable PI insurance for about the last 15 years, resulting in lower premiums and wide coverage, JLT said.
But in a tighter market and with many contractors preparing to renew their insurance in 2019, it warned there could be “significant implications for premiums and coverage”.
It advised contractors to speak to their brokers “well ahead” of their renewal date to see whether there may innovations or alternatives to existing cover.
It also urged contractors to engage with insurers as early as possible, given that more time and information is now needed to process renewals.
Meanwhile, main contractors should check their supply chain as the changing market conditions will result in smaller suppliers struggling to obtain adequate insurance cover, JLT advised, warning that an imbalance of liability throughout the supply chain can result in contractors incurring liabilities for error and omissions made by suppliers.
Tim Smith, CEO of JLT Specialty’s construction team, said: “The market for PI insurance has been hardening over the last year, but it is only in the last few months that this has intensified. Contractors have enjoyed lower premiums and greater capacity of PI insurance cover for many years, and so I think many could face a shock when they come to renew. This may also prove problematic in negotiations with project owners who may still expect PI insurance to be cheap and freely available.
“My advice to contractors would be to engage with their brokers and insurers as early as possible, and not wait until their renewal period as they may have done in previous years. Although changes to the market produce a number of challenges, brokers will always look for opportunities to create innovative solutions and alleviate cost increases wherever possible.”