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SURA Construction’s underwriting manager, Jim Wiechman, talks trends and emerging risks to look out for in the construction marketplace
What were the highlights for SURA Construction’s business in 2017?
2017 was a big year for SURA Construction. Last year, we bedded down our agency agreement with new security following the withdrawal of GLA from the Australian insurance market, which has allowed us to offer a wider policy coverage. Thanks to exceeding growth and profitability targets within our business, we were able to invest in our team and our underwriting support systems, and this included the notable appointment of Cameron Matthee as a senior underwriter in our Melbourne office, allowing closer access to Melbourne and Victorianbased brokers.
We were thankful that these developments and our history of servicing brokers with what we consider to be some of the best technical expertise in the construction insurance market was recognised by brokers, who named us among the best construction insurance underwriters in Insurance Business Magazine’s recent Brokers on Underwriting Agencies Survey. This type of recognition was particularly pleasing for us, as our agency has engaged the market via the AIMS network, meaning our products have not been available to all brokers.
What trends do you predict for the construction insurance market this year?
We think there will be a continuation of soft trading conditions, with capacity remaining plentiful for construction business. A focus on segmentation in terms of distribution and risk categorisation, with a stronger focus on claims active accounts is also likely to continue in this market. With the reduction in underwriting personnel who have genuine product knowledge in construction insurance across the industry generally, we are also likely to see increased reliance on sourcing business via internet-based platforms.
Are there any key emerging risks you think brokers/clients should be aware of?
The risks surrounding new materials have been highlighted by the spectacular losses involving aluminium-facade panels in recent times. Compounding this risk is how secure the process is that deems these new materials and products compliant with local building standards. While it is important that innovation is not stifled by punitive insurance terms, underwriters will need to be confident that new products pose no greater risk of loss than traditional ones.
There are also new construction methods. Modular construction is now viable, given the ability of manufacturers to achieve very fine tolerances with dimensioning. This will allow an increase in off-site fabrication of building components, and quicker build times, but could adversely impact the design risk. Interestingly, while cyber risk is not seen as a high risk for the construction industry directly, it could impact allied support functions, for example project management and document management.
What technical aspect of construction insurance do you think brokers could benefit from understanding better in 2018?
Our staff receive frequent enquiries regarding coverage for pre-existing property that is to undergo renovation or modification. Identifying which contracting party is responsible for this insurance can be difficult when the contract is silent, and home-building policies vary greatly in terms of how much contract works is permissible before the home-building policy voids. We feel it is important that brokers highlight this issue to their builder clients whenever they are taking on projects involving pre-existing property.
As a general comment, we think brokers sometimes have a challenge keeping up to date with the necessary product knowledge at the ‘coalface’ across Australia, particularly brokers who are outside the Melbourne and Sydney regions. Well-presented training material developed for Australian conditions can be hard to find.
Construction insurance is a niche offering and a complex product, which does require both a thorough knowledge of the way the cover operates as well as a high-level understanding of how the construction industry operates. We’ve addressed this by publishing a series of ‘Know-How’ newsletters available at sura.com.au/construction, and I’d encourage brokers who are interested in developing construction insurance knowledge to use them.
