However, through a regular review of your current insurance risk management arrangements it is possible to control costs and improve the structure of your insurance cover.
The past 12-18 months have been an extremely challenging period for the UK construction industry, with COVID-19 changing the way many businesses operate. This may leave companies and contractors exposed to certain risks where historically an insurance policy would most likely have provided cover.
Add to this an insurance market that was already hardening before the pandemic, and it is clear there is a greater need to manage business risk proactively wherever possible – not just transfer it to insurers.
Cost versus risk
Insurance is a contractual requirement, as well being a prudent form of risk management for most businesses, and an expected operating cost. As many businesses navigate a more challenging trading environment, their attention has turned to more effective cost management.
Looking at the range of risks your business faces can enable you to examine ways to manage the cost of insurances without unduly exposing your business and employees to risk.
A positive and consistent approach to managing risk can help you control your costs across many areas of your business, enabling you to strike an effective balance between cost and the quality of insurance cover.
A proactive approach to risk management
As a construction company or contractor you may already be aware of the key risks facing your business – from health and safety through to the various risks you and your employees or sub-contractors may face that could result in litigation. In the current insurance market it is more important than ever to examine your risk management approach and control your incident rate.
Key areas to review include:
Health & Safety: Construction companies have a duty of care to their employees and the public, that requires a robust health and safety risk management strategy. Accidents and injuries can be drastically reduced through regular risk assessments (including COVID-19 preventative measures), method statements, and scheduled employee training and communication. Accurate and consistent documentation of all training and risk assessments are crucial to enable you to demonstrate that you have taken appropriate measures to mitigate the risk, in the event of a claim. Simply operating an effective system is unlikely to be sufficient if you are unable to prove what action you have taken when challenged.
Quality Control: Reviewing your insurance policy wordings to understand expectations of product and material quality is essential, particularly at a time where supply chain issues may be more common and you may have been required to switch to a new supplier at short notice. Construction works not meeting the required quality management standards, either due to substandard material quality or workmanship, could incur rework costs and may also lead to reputational damage and/or legal action being taken.
The proposed changes to building regulations post Grenfell have far more stringent requirements regarding the type of materials used and the quality of those, so it is even more important to ensure that you comply with the specification in every detail, to avoid potential problems.
Environmental Responsibility: Having a clear and defined environmental risk management plan in place is looked on favourably by insurers. Your plan should cover the management of the key environmental impacts such as noise and vibration, air and water quality, the surrounding landscape, and the expected impact on people and communities.
Sub-contractor Liability: It is important to vet all sub-contractors in the same way you would vet your employees to help ensure there are no individual damages to your company’s reputation through poor workmanship or professional negligence. Ensure you review your contractual liabilities so that your business is not forced to accept liability for the mistakes of a third party. It is also a requirement of most insurance policies that you have a system of checking that sub-contractors have sufficient levels of insurance and often your own policy will stipulate minimum acceptable levels of cover. If you do not follow this process, your own policy may not respond in the event of a claim where a sub-contractor was to blame.
There are a number of risks that may seem less obvious but could still lead to financial loss and/or reputational damage for your business, including workplace discrimination, modern day slavery, credit risk, and cyber risk. The more detailed and comprehensive your risk management programme, the more you can protect your business and your people – and the better positioned you will be for securing the relevant level of insurance cover.
Presenting your risk prospectus to insurers
In a hardening and more challenging insurance market, taking the time to prepare well in advance of insurer discussions often pays dividends. Insurers generally take a more positive view of construction businesses that demonstrate a proactive approach to risk management and controlling their incident rate more positively.
By presenting detailed information on your risk exposures you can give insurers a clearer picture of your business risk. This can result in a more tailored approach to your coverage and potentially a more competitive price than that of a standard policy.
A broker experienced in the construction industry can advise and develop effective risk management and renewal strategies to help place you in an optimal position for insurer discussions. This can be key to helping ensure your business continues to have appropriate levels of cover in place as you navigate a period of ongoing change and uncertainty.
How can Gallagher help?
Conducting an insurance review: A Gallagher insurance review stress-tests the fundamentals of your insurance programme and defines where changes can be made to deliver improved outcomes, as well as confirming that it is fit for purpose. The review process includes advice on the balance sheet risks that are appropriate to transfer to an insurance policy through to determining the appropriate levels of cover and how your insurance programme should be structured in order to obtain the necessary liability limits at an acceptable price. For a more comprehensive review, we can include a Claims Defensibility Review which involves looking at your ability to defend an Employers’ Liability or Public Liability claim.
Renewal preparations: Once we have reviewed your insurance programme we can help you present your risk in a positive manner to insurers. This includes demonstrating robust risk management practices, strong contractual disciplines and being able to highlight how your business has adapted to the challenges during the COVID-19 pandemic.
Gallagher Risk Management Services: We can advise you on all aspects of your risk management including Health & Safety, Fleet Risk Management, Business Continuity Planning and Cyber Risk. We can help your business fulfil its legal risk management obligations and minimise your risk, which could reduce your insurance premiums, improve your terms and reduce your claims. Our risk management solutions include in-person services, an online portal containing risk assessments and guidance specific to your sector and new for 2022, access to RiskTalk – an app that records safety conversations as they happen and automatically uploads the data to a user-friendly dashboard.
The value of an insurance broker
In a more challenging commercial and insurance market, an insurance broker is much more than a price comparison service. Having access to a range of markets and longstanding insurer partnerships can help you to secure coverage to fit your current needs, while having a trusted adviser to shape what you need in the medium to longer term.
In the current market, having regular communication is key and we are committed to supporting you all year round, not just at renewal.
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