Running for cover

Nearly one year on from the fire that killed 72 people, the insurers and their broking partners are still figuring out their position on what it means for premiums and the scope of cover for those in construction. The situation is one of crisis. Crisis for many construction consultants whose job it is to provide advice on residential towers or tall buildings but who are seeing their professional indemnity insurance premiums soar. A crisis for the many building owners who are, as a result, struggling to find access to specialist advice for crucial and sensitive works on buildings at risk. And a crisis too for the many roofing and cladding contractors facing the prospect of going out of business as they are denied any cover at all. 

Insurers hate uncertainty. And with Dame Judith Hackitt’s review into the construction sector imminent and the interim report late last year already having fired a starting gun for lawyers to earn a fortune, it’s easy to see why there is uncertainty and why the insurance industry is still struggling to assess the financial fall-out of the disaster and the future risk associated with all those involved in the sector.

Insurers themselves have too often provided cover for unsafe buildings without the necessary checks and oversight

What is happening is that construction firms and their insuring partners are being hit by a triple whammy. First, the technical and testing regimes of construction products and procedures, which have always been a convenient box-ticking exercise that allowed underwriters to sign off cover in the name of compliance, are being scrutinised heavily and this is causing huge confusion. 

Second, the regulatory framework from which construction operates – whether it’s the role of approved building inspectors or what Hackitt calls a “golden thread” of supervision when assessing fire safety throughout the construction process – is being reviewed and is subject to change too. 

And third, the commercial view and behaviour of those in the sector is changing rapidly as they try to limit their risk and choose whether they want to operate in specific sectors or not. Many must be feeling it simply isn’t worth the hassle.

Meanwhile, as the harrowing stories that will be retold on the fire’s anniversary in a few weeks’ time will bring home to us, construction still has a job to do. Its job is to use the UK’s world-class engineering and design expertise to ensure that such an incident never happens again. This means advising construction’s clients but it also means helping insurers understand that while responsibility for any project comes under a supervisory regime imposed by the government, it is the insurers themselves that have too often provided cover for unsafe buildings without the necessary checks and oversight. So this needs to change too as it’s simply not good enough for insurers to refuse cover without due consideration. 

The route to solving this sorry predicament is not to financially penalise innocent companies striving to operate and do the right thing in a sector that suffers from inconsistent professional standards. It is to follow the procurement routes of all projects back to the ultimate construction client and their delivery partners to ensure that not only are the bill payers held accountable but they are also holding their supply chains to account in order to deliver safe buildings. And should the half of all construction works that central and local government procures come under intense scrutiny too, it would be a very good spur to bring about those cultural changes required to drive new fire safety standards through the sector. 

Until then, rising premiums will continue for all, along with increased scrutiny and bureaucracy. The fear is that the problems will get worse before they get better until the government (urged on by Hackitt) mandates meaningful legislative change such as greater power to building inspectors and an overhaul of product specification. But that’s a big, complex, costly call. And we’ll find out soon if Hackitt is going to make it and, more importantly, if this government is going to implement it.