Renewing Professional Indemnity Insurance (PII) for architects is becoming increasingly challenging. Rising premiums and new exclusions, particularly for legacy projects, are causing concern as insurers now view these as high-risk.
The 2017 Grenfell Tower tragedy has had a lasting impact on the PII market for architects. Since the early 2000s, premiums have surged for the first time, and many insurance companies have exited the architectural and construction sectors.
Key Implications for Professional Indemnity Insurance:
- Significant premium increases: Some clients have reported rises of up to 500%.
- Stricter risk assessments: Insurers are asking more questions, particularly about combustible materials in high-rise projects.
- Higher excesses: Coverage for cladding and basement claims is more limited, with increased policy exclusions.
- Renewal refusals: Insurers may decline to renew policies for firms with significant risk exposure or a history of claims.
Affordable cover is now a critical budget issue, especially concerning combustible cladding.
Mark Klimt, a specialist consultant at RIBA, noted:
“It will take time for the industry to stabilise, given the uncertainty surrounding cladding issues. Insurer exclusions vary but are generally broad, meaning PI challenges will persist.”
RIBA PII Best Practices:
- Contact your insurance broker early and submit renewal forms comprehensively and promptly.
- Include a cover letter detailing your practice’s background, the nature of your work, and your client base.
- Highlight strong risk management procedures. Practices with thorough record-keeping, material knowledge, and quality management systems are more attractive to PII insurers.
- If your practice has worked on buildings over 18 metres with cladding systems in the last 15 years, fully document these projects.
- Produce a detailed claims history, including the status of any claims from the last ten years. Ensure up-to-date summaries are provided for any ongoing claims.
- For projects involving contractor-designed cladding systems, confirm that the contractor’s Professional Indemnity Insurance policy covers cladding and that your PII insurance requirements are not stricter than those of the contractor.
Potential Insurance Crisis for Building Inspectors
Architects are not the only ones facing rising PII costs; building inspectors are also at risk. Post-Grenfell, a shortage of building inspectors, combined with increasing insurance costs, could lead to more dangerous defects and project delays.
Inspectors must have PII and public liability insurance to certify new buildings. However, with ongoing legal uncertainties about Grenfell cladding, insurers are limiting or excluding coverage for fire safety issues or charging inflated premiums.
A spokesperson for the Association of Consultant Approved Inspectors (ACAI) commented: “The stringent regulations on PII and public liability insurance are making it difficult for inspectors to obtain cover, leading to a crisis within the building control industry.”
Spreading Professional Indemnity Insurance Costs
Professional Indemnity Insurance has always been a significant annual expense, but the current climate could lead to even greater costs. White Oak UK offers a flexible payment facility, allowing you to spread the cost over 6 to 24 months, ensuring that key expenses are covered.
Benefits of White Oak UK PII Funding:
- Spread the cost with monthly repayments.
- Funds are paid directly to your account or broker.
- Dedicated Account Manager.
- Quick arrangement with simple online documentation.
For more information on managing your PII costs with a straightforward business loan, contact us here or call 01244 527300.
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