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Commoditisation of insurance is a double-edged sword. On the one hand, clients are happy because they’re getting a product that, on the surface, seems like great value. However, the flipside is that cheap and commoditised products tend to turn into an insured’s worst enemy if they have to make a claim, especially if they face high-risk liability exposures.
Wolverhampton-based Thistle Underwriting Services, part of PIB Group’s Q Underwriting Services, specialises in high-risk liability accounts in the tradesmen, small contracting and construction markets. The liability MGA has been in operation for more than 25-years, solving complex issues for contractors and other businesses that require a liability-only solution rather than a commercial package policy.
In 2018, the firm decided to expand its product offering and build out the strength of its liability portfolio by establishing an underwriting team, based in Leeds. The highly experienced unit is dedicated solely to underwriting high risk accounts (up to £5 million in turnover) and contractors’ business (up to £15 million in turnover). Insurance Business caught up with John Mason, underwriting director at Thistle Underwriting, to learn more about trends and challenges in the high-risk liability space.
Thistle’s high-risk liability clients present a number of heavy exposures. Examples of high risk clients really run the gamut from: abseiling contractors exposed to falls from height; scaffolders at risk of scaffold collapse; hot roofers, who might be careless when using heat; basement contractors at risk causing damages to surrounding properties or structures; and demolition contractors exposed to unstable structures.
“A number of high-risk clients work in hazardous locations where strict adherence to method statements is vital. If things go wrong the financial and human consequences can be catastrophic,” Mason told Insurance Business. “For example, a claim in a power station can involve damage to high value machinery, causing substantial disruption and possibly serious injury to employees and third parties.
“More familiar to most of us will be railways and airports, where seasoned travellers will be accustomed to delays and inconvenience. Many of these sites are subject to constant construction activity, and those contractors causing loss or damage (with associated delays and disruption) may be held legally liable for the consequences and a substantial insurance claim.”
Typically, claim frequency in the high-risk liability space is low – but severity is high. An example might be an employee falling from height. Such falls often cause life-changing injuries that result in expensive and complex liability claims. Likewise, careless heat use can result in substantial property damage and consequential losses. As such, it’s important for high risk insureds to purchase adequate insurance, according to Mason.
He commented: “Certain smaller high-risk business has become quite commoditised. Low premiums are very attractive and hard to resist, but they’re often accompanied by significant restrictions and conditions. The true nature of these only becomes apparent when an employee is injured or property is damaged. The exclusions kick in and the insured can be left with a significant uninsured loss, or a valued employee who cannot access compensation and therefore suffers long term health issues. It really is a false economy.
“Another issue for high risk contractors is selection of limits of insurance. We continue to see requests for £1 million or £2 million. Is that really enough when you consider the potential consequences of a high-risk liability claim? That price-driven mentality and wider marker commoditisation is driving a low-cost, poor quality approach. We don’t believe in that. We will work with our broker to offer £5 million and will top up to £10 million or £15 million if required.”
