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Sizeable increases in both the premiums paid for Professional Indemnity

Contractors Seeking PI Insurance Could Consider Derby Project’s Approach

Feb 2020

The ongoing Grenfell Tower inquiry is serving to highlight what has been described as the construction sector’s “handwashing”[1]  and culture of cost and corner-cutting, portraying construction negatively, at a time when purchasing professional indemnity cover is already difficult.[2]

Insurance providers have been nervous since the tragedy catapulted cladding into the headlines.  Previously, PI insurance was offered on an ‘any one claim’ basis and typically with a limit of £5 million.  Now, some insurers have left the market, whilst others are excluding cladding claims on newly written and renewal policies.

Another option has been for insurers to increase premiums drastically, with doubling or tripling of premium being common, according to the Royal Institute of British Architects (RIBA).  Excesses may also be increased and policy wording amended in a way that reduces the insurer’s risk, leaving a contractor more exposed.

The responses to the construction sector’s need for affordable PI cover have included the establishment of a new Construction Working Group by the International Underwriting Association (IUA).  This has the remit of addressing the lack of PI cover available to the sector, to try to find solutions to the present issues.[3]  The introduction of a Building Safety Regulator is also on the horizon at some point during 2020.

Whilst these initiatives seek to find solutions to the lack of PI cover, there is a refreshing new approach to construction projects, operating in Derby.  There, a £16m project to renovate the Derby Silk Mill is being managed by the main contractor, Speller Metcalfe, using an integrated project insurance procurement model. This eliminates the blame culture that we are seeing in the Grenfell inquiry, through a collaborative approach that sees all contractor and sub-contractors sharing the risk and agreeing not to sue each other.

This continues to be the Government’s preferred construction procurement method, since being laid down in the Construction Strategy of 2011-15 and continued in its Construction Strategy 2016-20,[4], so more projects may now run to this non-confrontational format.

Whether a contractor needs traditional PI cover, or a project needs an overarching level of protection to cover all collaborators, there is a need for contractors to work closely with a broking expert for several reasons. A broker may be able to source cover in a restricted market or find more affordable cover or policies with less punitive excesses or policy restrictions. If a client approaches them several months before renewal, they can potentially work with the client to reduce risks and also provide comprehensive protection for all the risks involved. 

Planning well ahead is the key when it comes to PI insurance under current circumstances. If you need to talk to an expert who can help you to do this, please use our ‘Find a Local Broker’ tool.