Why has PII cover for construction professionals become so hard to get – and what can be done?

Professionals in the construction sector have seen their professional indemnity insurance (PII) significantly increase since the Grenfell tragedy in 2017, with exclusions of cover becoming par for the course.

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A hardening insurance market gets even harder

In 2018, in the wake of the Grenfell Tower fire, the UK Government outlawed the use of combustible materials in high-rise buildings' external facades. The repercussions of this move were twofold: It increased regulatory responsibilities for consultants and contractors involved in the design or construction of residential developments, and it spooked insurers who saw the prospect of historic liabilities falling to them. Consequently, more and more insurers decided to exit the construction insurance market. Those that remained took steps to minimise their exposure, primarily where fire safety claims were concerned.  

A perfect storm drives insurers into retreat

In addition to Grenfell, other factors led to the PII market hardening. Carillion's collapse in January 2018, for instance, intensified fears that the construction industry was becoming unstable. In the same year, Lloyd's of London undertook a reappraisal of profitability in the sector, which led to significant changes in insurers' underwriting strategies and even saw some excluded from writing business. Many UK insurers questioned their continuing exposure to large PII claims in the construction sector. As a result, insurers either stopped providing PII or placed restrictions on cover and raised their insurance premiums.  

Those insurers who continued to operate in the market became far more selective about the businesses they insured. They reduced capacity (the maximum amount of value an insurer can insure), increased premiums, and, in some instances, applied onerous and restrictive amendments to their policies.  Some insurers even went as far as excluding liability for certain risks altogether.  More recently, the uncertainty surrounding Brexit, coupled with the fallout from the pandemic, has only served to hasten the hardening market trend and make PII cover even more difficult to access.   

Architects, surveyors, and engineers feel the pain

Today, the escalating costs of PII and widespread exclusions from cover are matters of deep concern for construction professionals. Architects, engineers, and surveyors, in particular, have been hit with a significant increase in insurance costs and more cover restrictions. According to a survey by the Architects' Journal, quotes for PII cover have become, on average, 213% more expensive. Surveyors have seen their premiums skyrocket, too, putting some practices at risk, as they require PII to operate. Engineers, especially structural and fire engineers, have also seen marked increases in premiums and excesses. 

Renewing your PII cover – making a good impression is critical

Remember, in the current challenging market, you must make a good impression. An experienced underwriter will review your proposal form, so treat it as a presentation of your business to the insurance market. Allow plenty of time to prepare for your PII insurance renewal. Completing a PII proposal form is not a simple tick-box exercise. You should start the process well in advance so that if you encounter any issues, you'll have time to address them. 

Additionally, an insurer will be looking for evidence of risk management practices and corporate governance protocols, such as staff training and protection, procedural guides, risk assessments and a business continuity plan. If you're investing in these behaviours, ensure your insurer knows about them. The more you can demonstrate that your risks are well managed, the more it will appeal to an underwriter to take on those risks or provide favourable terms. 

Work with your insurance broker 

Taking the initiative in the current insurance environment to focus on risk, handle losses, and manage exposures will better prepare you for the challenges of a hardening market than those who don't. And maintaining a close relationship with a reputable broker that understands your industry and has strong carrier relationships will contribute substantially to weathering these market conditions. So, work with your broker. Ask them for their view of the current PII market for your profession and how they plan to handle your renewal. Start the renewal process early. By allowing your broker more time to prepare your proposal, you'll increase the likelihood that they can secure the right coverage for your business. 

How Clear can help

Clear's professional indemnity team are specialists at helping clients create proposals for insurers. 

To find out more about how Clear's Professional Indemnity team can help your business, click below.

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