Within the UK construction industry over the last few years, there have been various large-scale disasters, such as the Grenfell catastrophe, COVID-19 and a series of devastating natural disasters caused by climate change. A huge rise in professional indemnity claims has caused a toughened professional indemnity market in the construction sector.
It has been predicted by insurance experts that the professional indemnity market within the construction industry will continue to deteriorate in the coming months, which will make it difficult for some construction firms to gain sufficient professional indemnity cover.
As a result of this, it is extremely important that construction businesses take appropriate action to limit the impact of the current professional indemnity market on their coverage options.
Top Causes Of The Hardened PI Market
A hardened market can be defined by a high demand/lower supply which results in: higher prices, tighter coverage requirements and extra limits on your policy. There are many factors that have contributed to the industries hardened professional indemnity market, however we have listed a few below.
Increased Number Of Claims
The major factor that has led to the construction market’s deterioration is the overall increase in professional indemnity claims. As construction projects tend to be larger and more complex as a result of new technology, such as renewable energy features as one example, they are therefore carrying additional risks and expenses. Any project-related disputes or losses therefore typically result in costly claim settlements for insurers.
As a result of the competitive nature of the construction industry, reaching a contractual arrangement with a client as soon as possible has become a crucial part of getting a project completed. In doing this, a contract that may be created may aim to appease the client rather than restrict the employer’s liability. As a consequence, construction firms have become more likely to make a claim resulting from contract disagreements, leaving insurers to pay a large claim.
Fire Safety Fears
Understandably, the Grenfell disaster has raised awareness within the industry of fire safety and industry issues. Since the government revised the cladding legislation earlier this year, insurers are becoming increasingly worried about the risk of expensive cladding claims.
How To Secure Adequate Professional Indemnity Cover
Due to the increase in the professional indemnity claims within the construction industry, a number of insurers have stopped selling professional indemnity insurance. However, at John Heath Insurance Brokers we are extremely pleased to be able to continue to provide professional indemnity insurance to this sector, with cover available from a wide panel of leading Insurers.