The need for professional indemnity (PI) cover has grown over the last 10 to 20 years, as more people enter professional, service-based, occupations. Contractors often resist buying PI insurance, mistakenly believing that they have no exposure to PI claims. The need for PI is often driven by contractual requirements, including any collateral warranty (duty of care) agreements which seek to establish a direct contractual relationship between employer-client and the sub-contractors and sub-consultants.
PI insurance safeguards against catastrophic losses in the event of legal action due to a negligent act, error or omission by the ‘professional’.
Who needs PI cover?
It is appropriate cover for anyone who gives advice, makes educated recommendations, designs solutions, or represents the needs of others. Professionals within the construction sector, accountants, engineers, IT consultants, software developers, planners, estate agents and contractors will often carry PI insurance. This can be due to the following:
- Many professional organisations, such as the Architects Registration Board, requires its members to have PI insurance before they can practice
- It is contractually required by the customer
- It provides extra protection against potential legal costs and expenses
The construction sector
Miles Smith has vast experience in providing professional indemnity solutions to the construction sector. In this area of business it can often be the case that the main contractor or project manager may seek to attribute errors to ‘bona fide’ sub-contractors when something goes wrong with a project or development. However, in reality, the responsibility lies with the main contractor and/or project manager, even if they claim to have no responsibility for the ‘design’ or ‘specification’ element of the risk.
The client is rarely concerned with who caused an issue that occurs, they simply want someone to pay for their perceived financial loss. Therefore, often Design & Construct claims will ultimately rest with the ‘last man standing’.
There are many reasons why a sub-contractor cannot be relied upon to provide indemnity to the client, following a financial loss as a result of an issue with a construction project, including:
- Sub-contractor ceasing to trade or going into liquidation
- Not maintaining “run off” cover for departed firms
- Their PI insurance being inadequate, non-existent or defective in some way (e.g. insufficient policy limits)
- Breach of warranty or policy condition
- Disputes between the parties as to who was responsible for the design
Newer or innovative types of design (such as modular or off-site built prefabricated units) can lead to a new type of PI claim.
Miles Smith’s in-house PI facilities will cover defective workmanship claims if they derive from negligent design or negligent specification.
How Miles Smith can help you
Contractors frequently have a need for advice before signing a collateral warranty or duty of care agreement. Both of our in-house PI schemes provide a free vetting service from the insurer’s panel lawyer.
Miles Smith’s professional indemnity team can provide cover for almost all classes of profession (other than solicitors and financial advisers).For more information on how we can help you secure more PI business, please visit our website.
Our professional risks team will work with you to grow this specialist area of your business. With unrivalled technical knowledge and vast PI experience, you can rely on our expert team to support you in this increasingly complex area of insurance.
We have two in-house facilities with limits of up to £5 million, under which we:
- place 70% of new business
- can quote for businesses with a turnover up to £75 million
- can cover over 150 trades and professions
- include a free collateral warranty vetting service for businesses within the construction trade
We have access to all London market insurers and, by working closely with our broking colleagues, are able to provide a full solution including liability, property and motor. We are supported by an excellent in-house PI claims service, and can also provide enhanced commissions for PI book transfers.
Contact our team for more information:
In the modern world construction companies face a unique range of challenges, from the protection of property and people, to the maintenance and development of governance and legislation obligations. And as their broker, you need to understand and empathise with these challenges.
This risk insight, aims to help increase awareness and demonstrate how some of the more common risks faced within the construction industry can be mitigated.
The construction industry in numbers
- Each year in the construction sector around 3% of workers sustain a work-related injury
- In 2014-15 there were 69, 000 cases of self-reported work-related illnesses
- In 2014-15 there were 1.2 million working days lost due to work-related ill health and 0.5 million days lost due to workplace injury
Changes in construction methods
The way buildings are designed has come a long way in recent years. Driven by influences in architecture and pressure from the government to increase the supply, houses need be built quickly whilst also being more carbon neutral. Construction methods today focus on producing cost-effective and energy-efficient buildings, by using a wide range of innovative designs and materials.
Modern methods can be split into the following categories:
- Volumetric/modular buildings – site assembly from modules and pods made off-site. A typical house may contain four modules, plus a roof module and floor cassettes
- Pod – a smaller fabricated unit, for example, a bathroom or plant room that arrives on site fully fitted or plumbed etc.
- Panellised – flat panel units ranging from framed panels in either timber or steel, to concrete and composite panels such as Structured Insulated Panels (SIPs)
- Hybrids (aka semi-volumetric) – a combination of the above
- Site-based methods of construction – systems that do not fall into the above
It’s important to note that due to less time being spent on site by contractors, off-site manufacturers can offer better workmanship at lower cost as ‘modular pods’, for example, are often far quicker and cheaper to manufacture off-site. However, these risks need special consideration as the nature of materials used can increase the risk of fire, water damage and subsequent costs.
According to HSE statistics, 10% of fatal injuries and 2% of reported non-fatal injuries are ‘persons on construction sites that were struck by a moving vehicle’.
Mobile plant includes any moving vehicle or equipment on site including excavators, telescopic handlers, mobile elevating work platforms (MEWPs) and dumper trucks. Some of the common hazards of mobile plant include:
- People or plant sharing the same site or route
- Where there is uncontrolled entry to and from the site
- People using mobile plant inappropriately
With todays regulations being more far reaching than ever before contractors need to be up to date with the modern demands of their business. Miles Smith can assist in this area, from systems to ensure compliance to providing financial assistance if the worst should happen and the HSE intervene.
The valuable materials and components of modern construction sites, such as the plant and machinery, can attract thieves keen on making a quick profit. In 2015 around 70% of property claims were for losses relating to theft. Arson and malicious damage incidents can also be very costly, often disrupting and delaying contract completion.
It’s crucial to make sure that adequate precautions are put in place at the right time, including the security of the site perimeter, CCTV, and the guarding and physical security of the plant and machinery. Making sure that plant and machinery is identifiable can often deter theft and, in addition, it helps the police determine proof of ownership and aid its recovery in the event of loss.
Professional Indemnity (PI)
New or innovative types of design can also lead to new PI claims if the design proves to be defective. Modular buildings and fabricated unit designs can leave very little room for errors. Firms involved in any part of the design process, or in an “overseeing” capacity (project management or co-ordination), should carry PI insurance. This includes providing a full Design and Build service, the construction and installation where the firm has subcontracted the design but retains overall responsibility, the pure design or technical services with no construction, and the construction and installation only, where the client has provided their own designs. As PI is arranged on a “claims made” basis, insurance will need to be continuously maintained for several years after the project has been completed.
As well as having access to all of the London PI Market, Miles Smith operates two in-house PI facilities which are able to cater for the vast majority of enquiries received. Not only are these facilities very flexible, but the extremely competitive rating helps to ensure that the business is won and retained.
Miles Smith and the construction industry
Miles Smith is very experienced in the placement of risks within the construction industry. Our long standing relationships with both Lloyd’s and company insurers allow us to support large capacity requirements, plus we have the ability to design bespoke placements that ensure the unique needs of each insured are met. We provide a comprehensive solution to cover employers’ liability, public/products liability, contractors’ “all risks”, contractors’ plant and equipment, professional indemnity, and commercial fleets often written on unique and exclusive wordings.
The courier industry is notoriously challenging to insure, and with online shopping becoming a part of many UK consumer’s everyday life, the demand for couriers is rapidly increasing.
Miles Smith’s motor broking team have provided the following details on the courier industry, the common risks faced by couriers, how cameras and telematics can counteract these risks, and the importance of placing courier risks with the right insurer.
The courier industry in numbers
The delivery of parcels and other specialist courier services accounts for the majority of the post and courier industry revenue.
- Industry revenue currently sits at £22bn per annum
- Revenue is projected to grow 0.4% in 2017
- The UK post and courier industry currently employs around 260,000 people.
- There are currently around 16, 000 businesses making up the industry.
Statistics taken from: https://www.ibisworld.co.uk/market-research/postal-courier-activities.html
These statistics demonstrate the demand for, and importance that, the courier industry has in the UK economy.
Risks faced by courier companies
Individuals who drive more than 80% of their annual mileage on work related journeys have 50% more injury accidents than similar drivers who do no work related mileage. (DfT Road Research Report No. 51)
The majority of a courier’s working day is spent on the road; therefore there is an obvious correlation between the time spent on the road and the frequency of damage to their vehicle, themselves or someone else.
Couriers are under different pressures to longer-distance haulage drivers, as their delivery routes change daily, so they are often driving down unknown roads to deliver to domestic properties.
One of the key factors that can lead to a decrease in driving standards is the pressure faced to make a certain number of deliveries per day, often within a fixed time period.
Cameras, telematics and couriers
Installing a camera on a courier’s vehicle is no longer seen as a small outgoing that could bring down their premium; it is now often seen as a requirement from insurers to provide a courier quote.
Installing a camera into a courier’s vehicle increases the speed accidents can be reported to the fleet manager and in turn, the insurer. However, one of the problems facing insurers is the late reporting of minor incidents which, if reported promptly, could be quickly dealt with. When the incident is then subsequently notified by a 3rd party, the cost of the claim can escalate considerably. Therefore, the installation of cameras and telematics allows fleet managers to keep a track of all of their vehicles, and enables them to monitor their driver’s speed, braking power and any erratic driving, so that they are immediately made aware if any of their drivers have been involved in an accident.
Miles Smith and the courier industry
Following recent events within the motor market, it is vital that courier insurance is placed with a trusted and reliable insurer. Miles Smith London Market Broking has a unique courier scheme, underwritten by leading A-rated London Market fleet insurers.
This Christmas Miles Smith have partnered with FareShare. FareShare are a UK based charity who save good food, destined for waste and send it to charities and community groups who transform it into nutritious meals for vulnerable people.
To find out more about the work FareShare do, follow this link http://www.fareshare.org.uk
Merry Christmas from all at Miles Smith!
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WHEN WILL WE EVER LEARN?
The failure of yet another unrated, passported market should be a constant reminder to all professional brokers of the need for ‘A’ rated paper. The TCF implications of using anything else could be catastrophic for your customers and your reputation. More importantly, you have a legal duty to use reasonable skill, care and diligence in selecting an insurer which is financially sound. If an insurer fails, and you haven’t fulfilled that duty, you could end up being sued by the client. Remember – the liabilities arising from ‘long-tail’ business can last for a working life time.
“Brokers may be held to account if they select unrated insurers – they will need to illustrate that they fully understand the financials and structure of these organisations in order to justify the recommendation of them to customers. Sadly, I conclude that, ‘You are judged by the company you keep!’ Brokers who fail to have adequate provisions or rules in place to safeguard their company render their own company assets and personal wealth at risk, as well as those of their customers.”
February 2014 Paul Chainey – Chief Executive Officer Miles Smith Insurance Group
We pride our selves in providing ‘A’ rated solutions on higher limits of indemnity at comparable premiums.
Talk to us today or send your enquiry to email@example.com
Contact your Broker Relationship Manager
You can rely on our expert team to support you in this increasingly complex area of insurance.
Where your customer needs are reasonably straightforward our in-house products enable us to provide a response within 24 hours. For the more complex enquiry we have access to the full London insurance market.
Your Miles Smith Professional Risks team provides:
- Unrivalled technical knowledge and vast PI experience
- Fast response times
- Two in-house facilities
- 70% of new business is placed under our facilities
- can quote businesses with turnover up to £50million
- can cover over 150 trades and professions
- with limits of up to £5 million (higher limits are available)
- include a free collateral warranty vetting service for the construction trade
- Access to all London market insurers
- Excellent in-house PI claims service
- Enhanced commissions for PI book transfers
We can work with you to grow this specialist area of your business.
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Call us today for more information.
INFORMATION FOR BROKERS
THE UPCOMING CHANGES TO IPT AND HOW THIS APPLIES TO MID TERM ADJUSTMENTS AND SETTLEMENT DATES
- The new standard rate (10%) will apply to new policies and renewals, incepting on or after 1st October 2016.
- Business processed in relation to cover that incepted prior to 1st October 2016, may be taxed at 9.5% if it is signed and settled to insurers before 1st February 2017, or if it is on an insurer’s own monthly payment facility and the first instalment is made before 1st February 2017.
- There is a concessionary period for mid term adjustments (MTAs). MTAs attracting an additional premium relating to policies that incepted prior to 1st October 2016 may be taxed at the 9.5% rate if processed and the premium paid to insurers prior to 1st February 2017.
- Return premiums must be processed using the tax rate that was applied to the transaction to which it relates irrespective of inception date or process date.
- All transactions processed or premiums paid on or after 1st February 2017, apart from return premiums, will attract the new rate of IPT irrespective of the inception date.
HOW IT WILL WORK IN PRACTICE
- If business is placed through a third party e.g. a Lloyd’s Broker, you will need to ensure they are paid in good time to enable insurers to be paid before 1st February 2017 if the 9.5% rate is to apply.
- Due to the time constraints of bordereau preparation and insurers payment protocols, Miles Smith requires that payment is received by the 31st December 2016 to ensure monies reach insurers by the end of January 2017. Payments not received by that date will be subject to the higher rate of IPT.
- MTAs attaching in the concessionary period will be raised at 9.5% by Miles Smith up to the end of November 2016 and at 10% thereafter. This will allow you at least one month to settle. Notwithstanding the above, MTAs raised within the concessionary period that are added to an existing Miles Smith direct debit plan prior to the 31st January 2017 will be raised at 9.5%.
- Any transactions that were initially raised at 9.5% and as a result of late payment to Miles Smith, subsequently become subject to the higher rate, will be re issued and 10% will be due.
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If you require any further assistance, please contact one of the team below:
020 7977 4897
DIVISIONAL DIRECTOR OF GROUP MI
020 7977 4838
THANK YOU TO ALL THOSE WHO RESPONDED
Your comments and feedback are very important to us and we will endeavour to use this information
in order to improve our service to you.
Congratulations to the 10 lucky winners of £100 John Lewis vouchers.
Chief Executive Officer
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Our very own Mike Eagles has not only just competed in the FIA Historic Endurance 3 Hour race at Spa Francorchamp Circuit in Belgium – the home of the Belgium Grand Prix- but also came away with a win! Mike was co driving a 1968 Triumph TR5, with 2.5 Litre engine developing 260 hp, with the owner Colin Sharp.
Over 80 Cars started on the grid, including Aston Martins, Porsches, TVR’s, MGs, and raced for three hours with two pit stops for change of drivers.
Mike and Colin won the under 2.5 litre class, and the attached video shows them on the top step of Podium at Spa.
Well done Mike!
In the very apt words of George Bernard Shaw:
‘We don’t stop playing because we grow old;
We grow old because we stop playing…’