A senior insurance figure has warned of impending difficulties for businesses operating in the construction sector, saying cover will likely become harder and more costly to obtain.
Adam Richardson (pictured), construction industry lead at Honan Insurance, says the industry has enjoyed a relatively soft market for the past decade, with insurance companies competing for market share.
However, a spate of losses affecting the sector, combined with a slowdown in approvals and tighter lending conditions, seems to have significantly dampened insurer appetite.
“From our observations, this change in insurer appetite and overall approach shifted around the end of the financial year in 2018 and has continued into 2019,” said Richardson.
According to Richardson, carriers are moving away from the top-line growth strategies they’ve long pursued and are now looking to exclusively support profitable business instead.
“In the case of distressed accounts, where contractors have had multiple professional indemnity losses or notifications, we are finding the local market has become unsupportive,” he said.
Unsurprisingly, this means rate hikes are on the horizon for businesses in the construction sector.
“Bill shock will be a significant issue for many organisations when they receive their professional indemnity renewals this year,” said Richardson, who anticipates increases of between 15% and 25% – and that’s just for those with clean accounts and no unusual exposures.
“That figure will rise upwards of 250% or greater for those accounts that have had claims, or which present significant new or existing exposure to insurers,” said Richardson.
“There have been instances where premiums have doubled or tripled based on the expiring sum insured levels of liability,” he added.
As a result, Richardson is being proactive with clients to discuss imminent price increases – and said other brokers should consider it too.
“We believe that brokers should work with their clients to prepare a minimum of 12 weeks prior to renewal in order to develop a robust marketing strategy,” he told Insurance Business.
“Clients must commit time and resources to ‘sell their risk’ in order to differentiate themselves from others,” he continued. “The earlier the renewal process commences, the easier it is to manage your customers’ expectations and the expectations of other stakeholders.”
Construction Industry Lead, Richardson says, will become increasingly important as insurers demand more detailed information about exposures.
“Underwriters will not positively receive risks which are presented late or close to expiry date and it is vital that proposal forms are submitted well in advance to ensure sufficient time to negotiate the most favourable renewal outcomes,” he said.
