Mactavish, a firm that specialises in resolving insurance claims, says that April’s coronavirus lockdown has added further distress to the already frazzled construction insurance market. As well as rising premiums, it warns construction companies to expect considerable erosion in the quality and extent of the insurance cover they buy.
It also says that some construction firms have made dramatic changes to their operations in response to Covid-19, which has altered their risk profiles, and this could mean current insurance policies may not pay out in the event of a claim. The second major risk, which, is almost unique to the construction sector, is that new insurance coverage restrictions can suddenly place firms in breach of commercial contracts that form the basis of existing projects.
Mactavish chief executive Bruce Hepburn said: “Some of these problems are also affecting other sectors, but there are two factors that make them particularly challenging for construction companies. The first is the difficulties posed to the sector by the end of lockdown and return to work, which are far from straightforward on active construction sites. The second is the way in which commercial contracts create a complex web of liabilities and obligations across contractors, sub-contractors and other elements of the supply chain.”
The problems faced by the construction industry in the professional indemnity (PI) market have been well documented, but other types of insurance are also affected. Construction all risks (CAR) insurance, for example, has seen increasing restrictions in cover and a doubling of premium rates over the past 24 months.
Meanwhile, insurers’ economic losses following the Covid-19 pandemic, estimated to top £150bn, will only lead to further coverage erosion in the guise of new exclusions, higher deductibles, lower limits and more disputed claims, Mactavish says.
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