Home / Local / Construction faces PI price shock, Honan warns
20 May 2019
Construction industry insureds face professional indemnity “bill shock” this year and more difficulty obtaining cover amid fallout from flammable cladding problems, Honan Insurance Group warns.
Honan’s Construction Industry Lead Adam Richardson says insurers are prepared to walk away from unprofitable business, and contractors that have had multiple professional indemnity losses are having to turn to Lloyd’s options with strict mandates.
“Bill shock will be a significant issue for many organisations when they receive their professional indemnity renewals this year, with premiums and loadings in some sectors increasing threefold,” he said.
Issues obtaining cover follow recent commercial decisions by reinsurers and the impact of the Grenfell Tower disaster in London and the Lacrosse and Neo200 apartment fires in Melbourne.
The Victorian Civil and Administrative Tribunal ordered Lacrosse builder LU Simon to pay more than $5.7 million to apartment owners, while also ruling funds should be paid to the company by the architect, fire engineer and building surveyor because they breached contractual obligations.
Mr Richardson says it is increasingly difficult to obtain professional indemnity cover in those areas without strict endorsements or exclusions for uncompliant cladding.
The issues raise fears businesses will not comply with their licences if they are unable to gain cover for cladding exposure.
“We have been emphasising the importance of early engagement with our clients because it’s an imperative in the current environment,” Mr Richardson said.
“Underwriters will not positively receive risks that are presented late or close to expiry.”