Home / Local / PI stalemate has surveyors on the brink
4 November 2019
Surveyors fear they may be forced into closure as the professional indemnity (PI) stand-off shows no signs of easing.
GMA Certification Group, one of Queensland’s biggest building certifiers, is considering the option after failing to secure a new PI policy to replace its previous cover that expired last Wednesday.
MD Geoffrey Mitchell says the business is presently in “caretaker mode” and is not able to do much work without indemnity protection.
“I don’t know what to do," Mr Mitchell told insuranceNEWS.com.au. “My head’s in a spin. We just haven’t been able to get a renewal offer.
“We’re still desperately trying to seek insurance. We are just holding. We can’t really do much. In essence, if I can’t secure insurance in the next couple of weeks it’s basically going to be out the door.”
Mr Mitchell says his business has had progressive rate hikes imposed over recent years from $100,000 to $180,000 in annual premium for a $10 million indemnity against potential claims.
Surveyors like GMA are feeling the crunch triggered by insurers’ decision to reduce their exposure to the problem-plagued construction industry. Premiums for a typical PI policy have increased sharply and usually come with large excesses and strict conditions.
“The PI insurance crisis for building surveyors that we predicted back in 2014 is starting to bite,” Australian Institute of Building Surveyors President Troy Olds told insuranceNEWS.com.au.
“Building surveying firms are closing due to [an] inability to obtain insurance, or they are forced to accept what is basically a junk insurance policy just to stay in business,” he said.
“This is all occurring in a climate where we are seeing an increasing number of spurious and vexatious claims against building surveyors.”
WA-based surveyor John Massey Group is similarly worried as its PI cover is due to expire next April.
The family-owned business paid about $80,000 in premiums for the current policy, a $60,000 rise from the previous year.
“Up until April next year the company has no exclusions, which means that the director of the company will not be personally liable for any claims at this stage,” Executive Director of Strategic Projects Ron Sherar told insuranceNEWS.com.au.
“But after April, if the insurer puts exclusions on our policy then [the directors] will be directly liable for any claims against the company for previous projects that we have worked on.
“If the [directors] become personally liable…then why would you operate a business?”
The current situation is one that the insurance industry has long warned would transpire if no significant action was taken to address the building industry’s longstanding problem of shoddy works.
Insurance Council of Australia spokesman Campbell Fuller told insuranceNEWS.com.au insurance “is at the end of the risk management chain, and the current situation reflects the fact PI insurance has been unsustainable since 2011”.
“Due to the volume of claims related to cladding and other non-performing building products, insurers have been losing money on PI insurance products since 2011.”