The construction industry has faced a host of challenges over the past 18 months which have put the future of many firms at risk.

These challenges mean insurers have had to revisit their strategies, amend their appetite and reduce the coverage available for construction businesses seeking professional indemnity (PI) insurance.

With Covid-19 continuing to have an impact on firms, it is imperative that you work with your broker to ensure they not only understand your business, but are also able to convey in-depth insight to insurers.

A complete risk analysis of the business is a crucial element in helping with insurer negotiations. At Lockton, we aim to increase the chances of a successful outcome for our clients by working with them to ensure our presentations to insurers pre-empt and caveat any issues underwriters may have.

As well as completing a full proposal form, there are several key areas which need to be explored and explained prior to any broker entering into negotiations with insurers. We have developed a blueprint which we work through with clients to cover the common insurer issues, including:

  • Structure of the business  
  • How case studies should be presented
  • Supply chain management
  • Risk management

If you are responsible for the selection and appointment of contractors, one of the key sections of your PI presentation is 'Supply Chain Management'. This is an issue which has long plagued the construction industry for two main reasons:

  1. Insolvency of contractors
  2. Insufficient PI coverage

So, what can you do to minimise the risk? Firstly, due diligence when selecting sub-contractors is crucial, especially around financial stability and whether they are likely to continue trading in the future.

Another point that needs to be considered is whether the contractor has the required expertise to deliver on the project. It is essential to look at evidence of previous experience along with any recommendations and their overall reputation in the project's particular field.

Additionally, if sub-contractors are required to carry a particular level of cover, how is this recorded? And how do you ensure this level of cover is maintained post completion of a project?

Although it is very common for contractors to maintain a list of preferred sub-contractors who they have worked with before, due diligence should be periodically refreshed for this list and the process of risk management must be clearly demonstrated to insurers.  

This is not an in-depth review of the points which should be covered within your renewal presentation. However, it gives you a brief summary of some of the key ways you can improve how your business is viewed and underwritten and shows why you need to provide a greater level of insight into your firm than what  is usually captured in the standard renewal form.