Insurers are looking at the pros and cons of BIM usage - how will it affect your insurance?
There is no ignoring Building Information Modelling (BIM) at the moment and there is no getting away from its potential impact. Government plans to make Level 2 BIM mandatory for use in public projects by 2016 mean that it is now on the radar of many firms. BIM is set to change the construction industry in a number of ways including a likely effect on the cost of buying Professional Indemnity Insurance (PII).
Insurers, who are yet to take BIM usage into account when assessing risk and pricing of policies, will certainly have much to consider when it is rolled out over the next few years. They are now beginning to look more closely at the pros and cons of the software and the cost of PII, which for many firms is one of largest single expenses after staff and property costs.
Collaboration makes it difficult to establish liability when projects go wrong
Most are positive about the insurance legacy that BIM is likely to create. An architect recently described it to me as “an amazing bit of kit”, and there are few that seem to disagree with this view. The sharing of plans and designs between collaborators on a project will allow for clashes to be detected at a much earlier stage, decreasing the risk of potential problems during construction. It will also ease communication, encourage better working relationships and improve overall efficiency. Insurers like words such as these, and they are likely to view them favourably when assessing the risk associated with BIM users.
On the other hand, the collaborative nature of BIM could be viewed by insurers in a very different light. Collaboration makes it difficult to establish liability when projects go wrong. The construction industry has a blame culture, which means that insurers have no qualms pursuing other parties when problems arise. It is possible that the open-ended liability created by BIM will lead to an increase in disputes and litigation, changing the risk profile associated with those that use it. Level 2 BIM is not fully collaborative and it is unclear if ring-fencing of files and controlled access will be integrated into the process.
One development that we could see in the not too distant future is the rebirth of single project insurance. Insurers have traditionally restricted their offering of policies along these lines for a number of reasons. Most importantly, it is seen as a difficult risk to rate as it is so hard to predict problems that might arise over the period for which such an insurance policy is required - typically up to 10 years or more. Besides this, insurers need to take into account representations of costs for the design, use, construction and deconstruction of the building. Alongside the hard facts that are used to determine most firm’s PII policies the risk determining single project insurance can seem almost like a guess.
Single project insurance could experience something of a revival … both premium costs and associated risks could potentially decrease
BIM’s touted reduction of risk, however, could make it a perfect pairing for this kind of policy, whether secured by the individual parties working on the project or collectively. If firms do start to club together and work on this basis, then there is a feeling that the market for single project insurance could experience something of a revival. This would be to the advantage of both insurers and those in the construction industry as both premium costs and associated risks could potentially decrease.
The cost of BIM is still prohibitive for many. Even if pitching for public sector work is not of interest to your firm BIM is a good risk management tool and this is likely to have a positive impact on your insurance costs in the future. When insurers start to price in these adjustments, savings on PII premiums and on overall efficiency may help to significantly offset the initial outlay, making the investment worth it.
David Martin is director at professional indemnity insurance broker Prime Professions