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Sizeable increases in both the premiums paid for Professional Indemnity

Construction Constraints Create Insurance and Duty of Care Difficulties

Nov 2019

Sizeable increases in both the premiums paid for Professional Indemnity (PI) insurance and the excesses that insurers are demanding to see on policies, are hitting the UK construction industry hard. This is according to recent comments by Gerald Kelly, General Manager of the Confederation of Construction Specialists.

The industry body talks of sub-contractors turning down work, or ceasing to trade, because of the associated costs of insurance. The way in which policies are being constructed is also causing issues, with cover exclusions and demanding conditions causing real issues for contractors.[1]

The industry is also suffering a decade low in terms of output, with new work being at its lowest volume since March 2009[2]. However, the skills shortage within construction is creating a gig economy within the sector. Projects are having to rely on Labour Only Sub Contractor (LOSC) and Bona Fide Sub Contractors (BFSC), who are ‘freelance’ workers in one sense but not necessarily in terms of a construction company’s duty of care.

BFSC workers should hold their own public liability insurance and most insurers insist that the main contractor checks that they have a current insurance policy in place, before appointing them. However, they do not need to be included in the headcount for Employers Liability (EL) Insurance.

On the other hand, LOSC workers must be covered by EL insurance, along with volunteers, students, work-placement workers and others who may not be necessarily viewed as ‘employees’.[3]

The insurance picture within construction is becoming increasingly complicated, due to the withdrawal of some insurers from the sector, sizeable global losses incurred on Professional Indemnity risks and ongoing Brexit uncertainty. With everything that is going on in the sector, particularly post-Grenfell, it can be difficult for a contractor to understand their legal responsibilities, not just in terms of insurance, but also with regard to their health and safety obligations.

Clarity can be brought to the picture if you consult with a commercial insurance broker who understands the risks within construction and your legal obligations and duty of care. Insurance is based on the principles of risk management, so working with an insurance broker who can also provide informed health and safety advice can often not only keep your business safer, but also help lower your premiums, in the longer term.

If you need specialist advice when it comes to insurance, or need to find someone who will provide affordable protection, sourcing a broker with knowledge and good access to insurer schemes and policies is a useful route to explore. Our ‘Find a Local Broker’ tool will help you narrow down some options, so make it your go-to resource, if you need to have an insurance package constructed for your construction business.