CONSTRUCTION firms could face ‘catastrophic’ changes to their insurance policy conditions this year that will threaten their abilities to do business.
That’s the view of commercial insurance placement and disputes specialist Mactavish, who said the changes include ‘sharply reduced cover levels’, which could prevent companies from accepting new contracts or drive them into non-compliance with existing contracts.
Other threats include premium increases of up to five-times and excesses/deductibles going up by a factor of three to four.
Mactavish said the changes are being caused by insurance ‘capacity blackspots’ hitting certain industry sectors which have benefited from a long period of attractive insurance pricing but have now become so complex that insurance companies are reluctant to underwrite the risks. The firm cited the example of ‘professional indemnity’ risks in construction and engineering, which have ‘skyrocketed’ in recent years as projects become larger, more technically advanced and involving more stakeholders.
Bruce Hepburn, CEO at Mactavish said, “The net effect on insurance value for money for construction businesses will be catastrophic. To avoid the risks created by these changes, it is more imperative than ever that they think about how to communicate their risk favourably, to meet all their legal obligations and to clarify the terms of their insurance cover before it is too late.
“There are two major further risks. One, the reliability risk is drastically increased because insurers will always challenge far more claims in a hard market, which is likely to increase even further beyond the 45% of large and complex claims currently disputed in the UK. Second, limitations will also lead to exposure to wild, punitive shifts in pricing and available limits, particularly pronounced in blackspot sectors and for companies whose risk information is poor, irrespective of how well the business is actually managed.”