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Professional indemnity insurance and construction – Are things improving?

15 June 2022

We examine the second annual PI insurance survey from the Construction Leadership Council.

According to the Construction Leadership Council (CLC) the answer is a definite no.

Its second annual PI insurance survey found:

  • Almost a quarter of construction firms have lost jobs due to inadequate PI insurance, due to high insurance premiums.
  • One in five said they were paying more than 5% of their turnover for their annual premium – with one in 20 paying more than 10%.
  • Nearly a quarter of respondents said they were still unable to buy the cover they want or need. 
  • 40% of firms had a worse experience of buying insurance this year than in 2021.
  • One in 10 construction companies said they had an excess that is 20% of their turnover or more, compared with 4% of respondents in 2021.
  • More than a third of respondents had been declined insurance by three insurers or more, which, although significant, represented an improvement on last year’s total of 44%.
  • 24% of respondents had lost work, primarily due to restrictions on the level of their cover relating to cladding or fire safety.

This remains a disappointing position for the construction industry.

This year sees the start of the introduction of the Building Safety Act (BSA) which the CLC describes as a really significant moment for the industry. 

However this opportunity to improve the industry image in respect of the risk seen by PI insurers is obviously not being converted. This was evidenced when DWF initiated a series a round tables across the construction industry to discuss the proposed Building Safety Bill. Read our report >

The insurers round table feedback was that construction and the now BSA is just too complicated, requiring too much unavailable time to understand. 

And who can disagree?

The BSA legislation, five years after Grenfell: 

  • Is going to cost the industry £3 billion.
  • Applies only to a narrow definition of higher risk buildings.
  • Introduces a new Building Safety Regulator which is unproven in terms of competency, resources and funding.
  • Introduces retrospective extended liabilities for existing buildings of 30 years.
  • Does not, according to the RIBA, do enough to address the “fractured” nature of the construction industry.

What was the question…?

Further Reading