It's hard to think of an issue – apart, perhaps, from site safety – that so unites all corners of construction. In contracting, Gleeson this week followed Amec and Mowlem in highlighting the damage that premiums are doing to its accounts. Small builders, who are often given just a few days to renew policies at exorbitant rates, risk breaking the law if they operate without cover (page 18). Faced with such an untenable situation, it is perhaps unsurprising, then, that they have called for a government review. In addition, as our legal writer Simon Lewis pointed out last month, these premiums are buying less protection. Instead of "each and every" policies that cover an unlimited number of events, policies now cap the sum that can be claimed annually.
The prospect for consultants is, if anything, worse. Insurers haven't made money from professional indemnity cover for a decade, so fewer and fewer are prepared to underwrite it. There are fears that capacity in the market might dry up in November, and QSs are bracing themselves for premiums to treble next year. Lawyer Rachel Barnes pointed out in Building this month that insurers are hiking consultants' excess from tens of thousands of pounds to more than £100,000.
This situation is potentially ruinous for everyone from surveyors to scaffolders. It has the potential to be construction's equivalent of football's crisis with ITV Digital. Not that the industry can expect any more sympathy from insurers than the soccer clubs got from Carlton and Granada. Indeed, many insurers say the premiums are not as high as firms claim. Nonsense, says roofers' leader Edward Cowan (page 75). Where the insurers do have a case is in placing the onus on contractors to show improved safety records and a more sophisticated approach to risk management.
Even so, the dire state of insurers' finances and our increasingly litigious culture mean it's unrealistic to expect premiums to fall soon. Firms will have to budget for higher costs, and perhaps count themselves lucky that they can get cover at all. But in the meantime, industry leaders and their sponsors at the DTI must intensify efforts to simplify the insurance market. The idea of firms "pooling" cover has been ruled out by insurers on cost grounds, so the best hope is single-project insurance that covers everyone for the first 35 years of a building's life. This is no panacea; some consultants argue the one-size-fits-all approach is unfair, while clients may be reluctant to offer de facto subsidies to other clients' projects. And will insurers back an untested system?
The case for single-project insurance is strong, though. BAA's early experiences on Terminal 5 suggest that removing overlapping insurance and promoting a less confrontational culture helps to reduce premiums. But this is only one example; more trials are needed. Accelerating Change suggested they start by 2004. No; now. The trials ought to be monitored by a panel of contractors and insurers, and perhaps should be chaired by DTI minister Brian Wilson as – excuse the pun – an honest broker. Single-project insurance must be made to work: the alternative is unthinkable.