Specialist contractors are facing significant insurance premium increases, sometimes of up to 800%, as insurers leave the market and those that are left look to improve margins in a hardening market. The trend follows greater focus on newer risks such as the cladding and cybercrime.
Increasing risks have seen 14 professional indemnity insurers leave the construction market in recent times. Industry sources have told Spector magazine almost everybody is struggling to get even the most basic form of professional indemnity cover and one contractor revealed a 40% hike in premiums. The pressure is increasing costs but also leading some clients to withhold payment if levels of cover change during a contract.
There are also allegations of an erosion in the quality and extent of the insurance cover offered to policyholders. This is often buried in T&Cs without being flagged by either insurers or brokers, meaning that policyholders may not be aware of their increased exposure.
Mactavish, an independent adviser, warns that it expects rates to continue to rise in 2021 and says that some companies will be unable to pay for their cover, meaning they will be forced to reduce operations, lay-off employees or even go into administration.
Bruce Hepburn, chief executive at Mactavish said: “The insurance market is hardening now, and premiums are rising dramatically as insurers seek to make up lost ground quickly. The timing couldn’t be worse for firms that are still being battered by the economic fall-out from the pandemic. For some businesses, these unexpected cost increases could be the final nail in the coffin.”