As chief executive of the National Federation of Roofing Contractors, Cowan has the unenviable job of representing the companies with the most to lose as liability insurance premiums go through the roof. Some have suffered premium hikes by as much as 1500%.
But when the crisis first raised its head, Cowan didn't know where to start.
"For God's sake, Edward, I said to myself, represent your members properly. I had no alternative but to get a bloody grip," he said.
Having got approval from his board, Cowan hired a parliamentary lobbyist to give him a running start in the corridors of Westminster. James Pawsey was a Conservative MP for Rugby and Kenilworth before being ousted in the 1997 election. The two met weekly to discuss strategy and Pawsey had some social capital he could cash in right away. He ran a dinner club and arranged the meeting between Cowan and IDS. In the following weeks Cowan also spoke to Tim Yeo, the shadow trade and industry secretary, and John Greenaway, spokesman on culture, media and sport – and an insurance journalist.
His new-found access didn't stop with the Conservative front bench, either. He's had contact with Martin O'Neill, Labour MP and chair of the select committee on Trade and Industry, and he's now become sufficiently well placed to bug construction minister Brian Wilson.
Cowan feels that his campaign has helped change Wilson's attitude toward the insurance crisis. Cowan calls Wilson's initial response "off-hand". In October last year Wilson told reporters that he wouldn't intervene in insurance matters unless there was significant public impact from a market failure. Last month, however, he appointed insurance expert Paul Hayward, seconded from Royal & Sun Alliance, to help the DTI understand the insurance issue. "I'm very aware of the difficulties and concerns that many construction firms have about their insurance costs," Wilson stated in a press release.
Mr Lobby gets tough
Cowan doesn't take sole credit for any possible evolution in Wilson's perception of the problem, but it appears he has been a rather effective gadfly, causing the construction minister to respond to written questions on the issue by at least three MPs. There is only so much Wilson can do about the crisis, which affects construction as a by-product, but he will be an important component of a cross-departmental response.
Cowan is also busy trying to get the trade and industry select committee to hold a one-day investigation into the insurance crisis next month. This is the committee that came out against retentions, and which the government ignored. Cowan is under no illusion about how much power the select committee has, but says it is all part of the bigger picture.
I’d be dead in the water without it
Edward Cowan, NFRC
"It's like painting a bloody great canvas," he said. "You have to keep your mind on where you're ultimately going."
So what is to be done? The crisis started when a series of mergers among insurers and the collapse of Independent Insurance in 2001 caused a 'softening' of the employers' liability (EL) market. Faced with less competition, those still in the game could raise premiums in an overdue attempt to make money in a sector that has not yielded a profit in a decade. Insurers say for every £1 they collect in EL premiums, they pay £1.47 in claims. It doesn't help that the UK is becoming as litigious as the USA.
Cowan doesn't feel bad for them, however. "They used EL as a loss-leader for other sorts of insurance, then invested the money in the stock market," he said. "They created the system."
Whatever the cause, construction has very little bargaining power. For one thing, due to the EL act of 1969, all companies must have EL insurance, but there is no reciprocal obligation for insurers to provide it. And despite its gathering efforts construction has a poor health and safety record. In short, there is little to stop insurers raising premiums as much as they like or simply walking away from a bad risk. Several insurers have done just that. If you're a roofer, scaffolder, steeplejack or other high-risk trade, insurers don't want your business.
To their credit, insurers have engaged with the industry. The Association of British Insurers (ABI) has met with trade associations, notably the National Specialist Contractors Council, to hear their concerns. Contractors want insurers to recognise that some companies are safer than others and to adjust premiums accordingly. The ABI appears willing to go along if trade associations guarantee their members' safety credentials through compulsory audits conducted by an independent third party. Trade associations recoil from this because of the cost.
Changing Policy on policies
The impasse may be rendered moot by two big government reviews on the subject. The Office of Fair Trading is studying the liability insurance market and the Department for Work and Pensions is investigating whether changes to EL regulations are necessary. These reviews have uncovered common ground between insurers and the construction industry. Both Cowan and the ABI agree that sickness could be removed from the EL umbrella because insurers find themselves paying large sums for risks they couldn't have foreseen. Tim Humphreys of the ABI says that other countries fund the risks of accident and disease separately: sickness claims are paid either by tariffs on employers or by government. "The UK system is by contrast cheap and cheerful," he says.
Whatever these reviews recommend, Cowan's campaign is far from over. He doesn't trust government or insurers to act in his members' interest. He wants the two reviews to be published in time for the select trade and industry committee to use them in any deliberations it might make. "I want them to come out with the recommendations and if legislation is needed, do it."
Whatever the outcome NFRC members can rest assured that the CE now means it when he says he represents them. Cowan won't say how much James Pawsey costs for advice and introductions, but he insists it's money well spent.
Source
Construction Manager
No comments yet