By Richard Brannigan, managing director.

Preparation is king when it comes to risk management but, in reality, it’s nigh on impossible to foresee all eventualities. This is particularly true for construction given the volatility seen in the sector over recent years.

With disruption potentially leaving clients facing unexpected damages or losses, industry professionals may be held liable if it is associated with works they’ve carried out. Professional indemnity (PI) insurance is an essential security measure for anyone facing such claims.

In the instance something goes awry, PI insurance is designed to safeguard business owners, contractors, and the self-employed against claims arising from professional negligence, helping to cover legal expenses, damages and other costs.

Market conditions 

From a quality control perspective, the spotlight is firmly on the construction industry. It comes following the Grenfell tragedy as there’s an increasing need to raise the bar in terms of quality. 

This, paired with a rising number of claims, has resulted in the hardening of the PI insurance market. Hard market conditions mean higher premiums, lower indemnity limits, and more restrictions. 

Tips for obtaining cover:

  • Plan ahead of your insurance renewal

Meeting with your insurance broker to discuss the continuation of your cover at least three months before the end of your policy period is a good way to start the process. By completing renewal forms and understanding full risk management activities ahead of time, you’ll also assist a smoother acquisition of cover. 

  • Choose the right insurance broker 

An experienced broker with strong market knowledge and relationships can help you navigate a tricky market and aid a clearer understanding of your options.  The right broker will also comprehend the counterproductivity of flooding the market as some insurers will not look to quote if too many brokers are involved. 

Counting the cost

When it comes to the cost of cover, the only real means of keeping the price down is to provide as much information about your business activities as possible. Doing so, will enable a full picture of risks to be generated.

Reducing the expense of PI insurance premiums could also be achieved through an aggregate basis of cover, where all claims are covered by the full limit of insurance provided. However, despite this being the only option available in some cases, an aggregate policy is unlikely to give you a sufficient amount of cover. 

Instead, and where available, an ‘any one claim’ policy offers more protection as each claim can be covered up to the established limit, thereby decreasing the likelihood you will have to make up any excess cost. 

Needless to say, buying cheap isn’t always the answer. Not all policies are created equal, so while you think you’re getting a good deal by paying less up front, you may actually be buying an inferior product. As a result, you may well pay a larger penalty if something does go wrong.

Protecting yourself

Ultimately, PI insurance is not a legal requirement, however some professional bodies and clients may stipulate a minimum level of cover before doing business with you. Besides, in a high-risk sector, it pays to have the peace of mind that you’ll be supported financially in the face of a claim.