Professional Indemnity Insurance (PII) in a challenging market place
MFL Professional Indemnity Insurance Brokers have acted for construction industry bodies and their members for many years, including The Chartered Institute of Architectural Technologists (CIAT), The Chartered Institute of Ecology and Environmental Management(CIEEM), The Landscape Institute (LI) and more recently The Institute of Historic Building Conservation(IHBC) and The Chartered Association of Building Engineers (CABE).
Many practices will be aware of the ongoing challenges within the construction Professional Indemnity Insurance market, and of the guidance note issued by RIBA, intended to assist with the renewal of your insurance cover.
If not, we set out the points made by RIBA as below. For those practices able to produce the type of information suggested, we would anticipate that suitable PII solutions will be readily available at competitive terms.
This note is intended to assist all construction professionals, as the PII market itself is undergoing a significant change which is impacting beyond architecture.
Following the Grenfell Tower fire disaster, the PII market for architects is undergoing significant change and premiums are increasing for the first time since the early to mid-2000s, with several insurance carriers and Lloyds’ syndicates withdrawing from the architectural and wider construction PII market altogether. Before Grenfell, claims against construction professionals were already on the increase in volume and, some no doubt emanating from economic factors.
Since that terrible event, all insurers are asking more questions relating to potential exposures. The RIBA makes the point that there is uncertainty in the insurance industry, about:
- How to price risk in the context of a building regulatory regime.
- A construction industry that has been heavily criticised in the Independent Review of Building Regulations and Fire Safety (https://www.gov.uk/government/publications/independent-review of- building-regulations-and-fi re-safety-final-report), raising serious concerns about the competency of those involved in ensuring the fire safety of a building.
- The quality of outcomes in building procurement processes.
The PII market is seeing:
- Significant increases in premium levels.
- Insurers being more diligent and proactive with their risk assessment before quoting or offering renewal of PII cover, including extensive questions relating to the use of combustible materials on high rise schemes.
- Insurers are imposing higher excesses and limitations of cover connected to cladding and basement claims, and application of cladding related policy exclusions.
- In some cases, insurers refusing renewal of cover in the event of significant or perceived significant risk exposure or where there is a serious existing claims or notifications record
RIBA have therefore offered the following best practice guidance:
- In the current market conditions, it is essential to make early contact with your insurance broker before renewal and to submit your renewal proposal form in good time;
- Complete your proposal/renewal form properly and comprehensively;
- Produce a covering letter/email giving the background to your practice; explain the nature of your work and your client base, and point out any good risk management procedures you have in place. Practices with accurate record-keeping, good knowledge of the materials they specify, robust quality management systems, and a proper risk management process will be more attractive to PII Insurers.
- If your practice has been involved in work on buildings over 18m in height with external cladding systems during the last 15 years, you will need to document this in as much detail as possible.
- Produce a claims history document that details at a minimum any PII claims/notifications you have had in the last ten years, and the current status of these (name of claimant, date of loss, insurer, details of any payments/reserves, open or closed status). If you have claims closed with payments, or any still open, ensure an up to date summary of the claim(s)/notification(s) is provided with confirmation of the present position.
- On projects involving contractor design of cladding systems, you should check that the contractor’s PII policy does not have a cladding exclusion clause and that the contractual requirements for your PII insurance are not more onerous than that offered by the contractor’s policy.
In addition to the very valid points made by the RIBA, MFL Professional Insurance Brokers will look to work with your practice to identify those other features which might exist within your fee breakdown or discipline specialism and which certain Insurers are willing to look at favourably.
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