Professional Indemnity: Planning ahead

Professions working in the construction industry continue to face increasing challenges when renewing their professional indemnity insurance (PI). Stricter conditions in the insurance market following the tragic Grenfell disaster and the pandemic resulted in the reduced availability of insurance cover and increased premiums. According to a recent Royal Institute of Architects (RIBA) member survey, 80% of respondents reported a rise in their insurance premiums last year, with almost half saying their premiums had increased by 25% or more, 32% experienced a minimum of 50% increase, and at the top end of the scale, 17 % said premiums had doubled or more. 

Changes in legislation – The Building Safety Bill

The new Building Safety Bill currently going through parliament is expected to bring significant change for the construction industry. Current proposals include changes that will also affect other legislation, such as the Defective Premises Act, which provides legal rights to homeowners of properties “unfit for habitation”. The new Bill proposes two amendments to the Defective Premises Act (DPA), which seeks to help owners of properties with cladding defects. The most significant amendments extend the current limitation period from 6 years to 15 years, dramatically increasing the homeowners’ time to bring claims under the DPA. The act will also be widened to cover any works to existing buildings containing two or more homes. Section 38 of the Building Act 1984 will provide legal rights for defects in breach of the Building Regulations applicable when the works were undertaken, and the limitation is 15 years from the date of the breach. Finally, while cladding defects are the focus of the Bill, the new rules will also apply to any building/refurbishment works which make a property unfit for habitation. These changes mean that contractors, developers, and designers could be exposed to claims after project completion for a far more extended period.

How can construction professionals get the best possible PI cover for their business?

Work with an insurance broker who has expert knowledge of changes to insurance cover and new exclusions. Use a broker with comprehensive experience in the construction market; they will have the necessary expertise to secure the most relevant PI insurance and access to a wider range of insurance providers. It’s also essential to prepare information regarding your business to get an accurate quote:

• Start talking to your insurance broker about your current PI needs approximately three months before your insurance renewal.
• Identify and prepare the critical information that’s required for your renewal. Your insurance broker can advise you what’s needed by focusing on things like evidence of sound risk management practices/documentation, information regarding your firm’s health & safety practices, and complete details of your claim’s history are a good start.

Over the next few months, as the Bill goes through the final debates and amendments in parliament, insurers will start to communicate how this legislation will affect PI insurance within the construction market.

Kerry London is authorised and regulated by the Financial Conduct Authority. The company is a leading UK independent and Lloyd’s accredited broker, which means that we work with a wide range of niche and major insurers.

This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such or regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note, we have relied on information sourced from third parties, and we make no claims as to the completeness or accuracy of the information contained herein. You should not act upon information in this bulletin nor determine not to act without first seeking specific legal and/or specialist advice. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to the fullest extent permitted by law.

Categories: Construction, Professional Indemnity,