The construction sector is a major part of the UK economy, generating roughly £90 billion annually, and employing over 2.93 million people – round 10% of the UK’s workforce.1
The success of the sector however, doesn’t mean that it is free of its risks and challenges. The Construction Specialism Team at commercial insurance broker Gallagher – Tracy Keep and Charlie Case – explain how working with a broker who knows the industry can help to mitigate those risks.
All too often, when reviewing a new client’s insurance programme, we are repeatedly finding gaps in cover, or wording in contracts that unfairly places responsibility onto the contractor. Inadequate insurance in this sector is far too common, partly due to the lack of consistency, with a long chain of suppliers, contractors and sub-contractors, and tight margins to work to.
There can also be a lack of industry knowledge when a claim is being handled by a non-specialist broker. You need your broker to be able to get into the detail of the policy wording to find those gaps, so claims are not turned down. Working with a construction specialist can help make that job easier, and leave you less exposed.
Here are some of the most common examples we see, where companies often find themselves at risk:
The business description does not adequately address all the activities which a construction company does. Regularly, whilst on a project, additional work can be added to the programme, and the contractor will agree to do it to win the new business.
However, they don’t always remember to update the business description on their policy. It is vital that all the activities are covered and that insurers are given advance notice of when they are expanding into a new area, even if they think it is simply an extension of what they already do.
Solicitors acting for an employer will often amend contracts, adding additional clauses, which increases the liability of the contractor beyond what they would be legally liable for, with the contractor signed up for terms not covered by their policy.
It is also essential that contracts from the principal contractor to the sub-contractors and designers are back-to-back with the wording from the employer to the principal contactors. Otherwise, the liability stays with the principal contractor and they are not able to pass the claim down to the people who actually caused the problem.
A specialist broker will be able to review contracts and identify where the contactor is at risk. In nearly all cases, using a broker with the necessary construction industry knowledge means that they can ask for the wording to be amended to remove the trip hazards on the policy, and insurers will usually do this without charge or for a very minimal cost.
The key priority for construction companies, above all else, should be protecting their business – the reason for taking out insurance in the first place. However, understanding the risks facing your construction business can be difficult, so if you need help to negotiate your way on the path, please get in touch.