Steve Green, Director at Anthony Jones Insurance Brokers, talks to us about the risks construction companies face and ensuring they choose the right Insurance Broker.
Every year people are killed or injured as a result of failure – failure to ensure that driving safety is adhered to. Moving vehicles and plant is always going to be high on road risk and site risk agendas but the variety of vehicles within the Construction and Civils sectors is so extensive that managing that risk is challenging. Add variety of vehicle types to varying terrain, route hazards, obstructions, loading and unloading and training adequacy and the risk factors start to add up. It’s a complex equation for those Construction companies to address.
Insurance premiums are set to rise again after reductions or at least stability in prices as insurers look to improve profitability and reflect rising accident rates. Despite advances in vehicle technology, losses in the commercial motor market are rising. It could be something to do with the fact that 90% of all accidents are down to driver error. Drivers are becoming increasingly distracted and some behaviours have become so deeply ingrained that no amount of training seem to change them. There appears to be a very close correlation between the falling price of fuel and increasing claims frequency. Lower fuel prices mean more traffic and there is simply less margin for driver error on more crowded roads.
The biggest factor that will influence insurance costs is claims frequency and it is starting to rise again after a period of stability.
“ UK motor insurers will have to react to rising claims frequency. It really is just a question of timing”
The size of claims is also getting bigger. Consultancy EY estimates claims inflation was 4.3% in 2015 and will increase to 4.6% in 2016. The key concern would be bodily injury inflation at 7.7%. Injuries are becoming a larger percentage of claims bills despite challenges to the blossoming culture around claims and better ways of combatting fraud. An example of this would be plans to end the right to cash compensation for minor soft tissue injuries that were revealed by Chancellor of the Exchequer George Osborne in the 2015 Autumn Statement. The government stated that it wanted to make it harder for people to claim compensation for exaggerated or fraudulent whiplash claims. In addition it said it was targeting legal costs with more injuries able to go to the small claims court as the upper limit for these claims will be increased to £5,000. Good news but fraudsters are fraudsters and history tells us that there is always an equal and opposite reaction.
There is no let up to the pressures on companies as the Government squeezes revenue from areas previously only lightly touched upon. Most immediate to mind is Insurance Premium Tax (IPT) increased to 9.5% on 1st November 2015 and just two days later The Sentencing Council issued its guidelines of “Health and Safety Offences, corporate manslaughter and food safety and food hygiene offences”.
The guidance comes into force on 1st February 2016 and very simply it will mean substantial increases in the level of fines imposed by the courts for Health and Safety offences and Corporate Manslaughter for businesses and an increased likelihood of going to jail for individual offenders. It is likely that we will see increases in prosecution and defence costs. The stakes are higher. In addition, companies need to really understand the true cost of a regulatory investigation into a workplace accident.
The financial implications of a serious workplace accident are eye watering. The courts will assess Culpability – the failure to meet standards and judged in four categories from very high to low. They will then assess Harm - again in four categories.
All Directors should take an increased focus in ensuring that Health and Safety is well managed. Never more so than right now as the regulatory challenges tighten.
Think carefully about your choice of insurance broker. It matters that you partner with people who understand your sector and the insurance market that caters for it. Experience matters. A poorly managed insurance choice based on price alone can very quickly outweigh that short term saving. Make sure your broker helps you to improve your risk profile and have in place risk management measures that puts you in as much control as you can in managing the cost of insurance.
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