A new approach could stop PI costs spiralling

摘要

Significant increases in insurance premiums have raised stress levels across the construction industry. I recently heard of one business being quoted a premium of £75,000 for £im worth of professional indemnity cover! Professional indemnity (PI) insurance is a form of performance-related assurance which, for contractors, comes on top of other performance securities such as bonds, retentions and guarantees. The Grenfell Tower tragedy may have been the spur for recent rises but PI premiums have been increasing steadily for some years - and the impact is falling most heavily on small and medium firms in construction supply chains. Most companies are required under contracts/ warranties to keep PI cover in place for 12 years. As balance sheets continue to deteriorate, insurers have become even more reluctant to provide cover and, if they do, a large excess is usually required. Before we run off to rough up a few insurers, we need to reflect carefully on one crucial factor: the problems we are experiencing with PI are the result of a traditional construction/ infrastructure procurement process driven by a lowest price culture - and the need to effect wholesale risk transfer.