In the midst of chaos, there is opportunity.
The famous quote from Sun Tzu in The Art of War may not have been intended for the insurance industry – but it is one that stands applicable especially now in relation to the construction sector where the building blocks appear to be crumbling. The July 2019 IHIS Markit construction purchasing managers’ index dropped to its lowest levels since April 2009.
“According to the latest survey of industry executives, the UK construction sector is suffering a loss of momentum, led by the sharpest reduction in new work since March 2009,” Matt Carlick, broking director at Citynet Insurance Brokers, told Insurance Business. “As the market tightens, some insurers are looking into decreasing the number of brokers they do business with.”
At the heart of the problem appears to be a shortage of skilled workers, leading to greater use of LOSC and BFSC contractors, according to Carlick.
“Greater use of lower skilled or non-skilled workers who tend to be less experienced in a particular trade or are new to a company and therefore less aware of the H&S culture of an insured,” he said. “Due to a skilled worker shortage there is a danger that the cost for these employees increases which can negatively affect profit margins and therefore the funds available for investment in H&S initiatives.”
Amid the clouds however, there are plenty of silver linings – and savvy brokers have plenty of opportunities to be the cement that keeps businesses watertight amid the onset of economic bad weather.
“Despite the comments about retrenchment in the UK construction sector, underwriters would suggest that they are seeing small organic growth for London and South East based risks,” added Carlick. “This also means an increase in estimates for LOSC and BFSC payments which bring their own insurance issues with them.”
“Of course, there are concerns about the current business outlook and these are overwhelmingly attributed to domestic political uncertainty,” continued Carlick. “The construction sector hasn’t been left unaffected by this current climate. Rising risk aversion and tighter budget setting by contractors in response to Brexit uncertainty can hold back activity, especially in the commercial sub-sector.
“The key is to work with a specialist – and, as wholesale brokers, Citynet has a proven ability to build and maintain relationships with underwriters which is essential to ensuring that the best deal is on the table for our retail broker clients.”
Finding the best deal also means finding the right policy for clients. While each business will have different individual needs, Carlick believes there are certain important areas of a construction policy that every broker should look for.
“Important areas of a construction policy include cover for asbestos; attitude towards criminal defence costs; height and depth limits – ideally there should be none; cover for hazardous locations/activities; attitude towards rehabilitation; insurers’ flexibility to be able to deal with mid-term amendments which are hazardous and/or unusual,” he said.
Above all, however, it’s about finding a trusted partner, Carlick believes - one that has “its’ fingers on the pulse of this dynamic market” and “strong market relationships.”