The insurance market for social housing has seen three A-rated property stock insurers exit the market within the last 18 months1. With many housing associations now having to find a new insurer at a time when the market is contracting, the focus has shifted from making savings to achieving value for the organisation.
To secure an acceptable deal on your insurance cover, it is important to present your requirement with clarity and offer insurers a compelling reason to bid for your business. The guide below will help you understand your options when tendering and the actions you can take to help you prepare and succeed.
In this guide, we cover:
- How often should housing associations tender their insurance?
- Has Brexit affected procurement legislation?
- What options are available for housing associations when tendering?
- Your duty to procure compliantly
- How and when to prepare your tender
- Critical information to include
- Insurer requirements
- Further tips for engaging insurers
How often should housing associations tender their insurance?
Most housing associations tender their insurance services every three to five years to ensure compliance with the Public Contracts Regulations 2015. Occasionally, insurers choose to materially change their terms during the contract, at which point a tender may also be required.
Has Brexit affected procurement legislation?
Since leaving Europe, primary procurement legislation in the UK remains largely unchanged. The only material change to date is the requirement to post contract notices on the Find a Tender Service (FTS) rather than in the Official Journal of the European Union.
What options are available for housing associations when tendering?
Various route-to-market options are available and your preferred option will depend on your level of technical insurance expertise, the time you have available to tender and the complexity of your risk.
In-house: If you have technical insurance expertise to gather data and evaluate policy covers, and the time to dedicate to this project, running a tender in-house gives you the opportunity to shape the tender, set your own timescales and control queries and relationships. You will be responsible for publishing the contract via FTS and managing the online portal for bid clarifications and responses.
Framework: These are agreements with a single or group of bidders who have already demonstrated the ability and appetite to offer relevant insurance coverage. Using a framework cuts down the time to run a tender. Sometimes direct awards can be made under a framework. Frameworks may help those running tenders in-house.
Consultant: A consultant will run the tender from start to finish with services which may include creating your tender documentation, posting contract notices and evaluating the bids. Data collation and management of insurance contracts will remain with you once the tender is complete.
Broker: Brokers have access to the wider insurance market. This is important where your risk does not neatly fit into standard offerings from the market. A specialist housing broker can run the tender from start to finish, working with you to select the appropriate insurer for your risk.
Your duty to procure compliantly
As the contracting authority, you have the duty to procure compliantly. Engaging a broker or consultant does not discharge you of this duty. If you use a broker or consultant, stay close to the process and ensure you are satisfied the result is supported by the evaluation presented to you.
How and when to prepare your tender
Markets respond more positively if they are introduced to risks early, so allocate enough time to your tender. A rushed or poorly constructed tender will likely get poor results. Underwriters build an understanding of the organisation and its approach to risk, and generate their own appetite through this premarket engagement phase. It is important to gather data and risk information early, engaging your colleagues in this process. Failure to gather relevant and comprehensive data may impact your ability to discharge your duty of fair presentation under the Insurance Act 2015.
Consultants and brokers should work hard to create an appetite for your risk. No one risk is the same and an experienced housing insurance specialist should be expected to articulate your risk information to the widest possible marketplace.
Critical information to include
Insurers want excellent data to understand their exposure. Do you have properties in a high flood-risk area? Do you have high-rise buildings? Have you recently undertaken reinstatement valuations? These are all topical subjects in the market but do not always have to be negative. Underwriters will cherry-pick the risks they wish to work with. Risks with poor or inadequate data will not be attractive to the underwriters and getting quotations from all markets is no longer guaranteed. Improve your chances by developing quality data sets.
As a minimum, insurers require:
- Five years’ claims experience including property type, paid/outstanding costs, chances of recovery and narrative on losses exceeding £50,000.
- Cladding and external wall systems’ details for all properties and plans for rectification works.
- Property stock listing including; rented and leasehold tenure, construction type, buildings over £5 million, and individual reinstatement sums insured per property.
- Wage roll and breakdown of turnover including rent roll and other income.
- Motor fleet listing and confirmed claims experience.
- Development contract values and site addresses.
- Completed proposal forms for crime, cyber, professional indemnity, directors’ & officers’ insurance.
- Engineering plant list, including full address and postcode.
Further tips for engaging insurers
Social housing is a specialist sector and insurers likely have seen your risk every three to five years.
Here are some tips for a successful tender:
Start the process early: Don’t be afraid to engage with the market immediately after your penultimate renewal. It will help you understand what insurers are looking for and you can prepare accordingly.
Work backwards: Develop a tender strategy and timeline and ensure all stakeholders are aware of their role in the process. Work backwards and map out your own internal deadlines, board sign-off, Section 20, school holidays, Christmas, etc. Remember that underwriters need a minimum of six weeks to prepare a quotation.
Tell your story: Be positive about risk factors such as cladding. Explain what you are doing to manage the risk. Discuss it with the market. This will help you develop a tender pack of real value to a competing underwriter.
Buy what you need: Take time to review the coverage you require. Is the programme you purchased five years ago still fit for purpose? Are excess levels correct and does the coverage support your plans? If an underwriter understands why you insure the way you do, they have a greater belief that you understand the risks you face and may quote more aggressively.
Have all tender documentation available for going live: You must have all tender documentation available to potential bidders at the point you publish your contract notice, irrespective of the procedure you intend to follow. If you have conducted your pre-market engagement effectively, your documents will contain all the information necessary for a successful tender.