The Grenfell tragedy’s effect on the insurance industry was unprecedented. The pool of approved insurers diminished, rates increased and restrictions in cover became more prevalent.
Following the Grenfell tragedy in 2017, there was uncertainty and concern over how widespread fire safety issues were. Fire safety is a significant issue for surveyors, one which has proven challenging. Also for insurers, as in 2019 it became apparent that fire safety coverage was not available in the professional indemnity market.
There were also concerns over the EWS, which is the external wall surveys regime, meaning fire safety remediation work was reflected in a building’s valuation.
RICS members are all required to hold professional indemnity cover at a minimum level. Yet, because of the capacity and coverage challenges involving professional indemnity insurance for surveyors and construction businesses, the RICS have changed the terms of the cover requirements. In past years, the RICS have worked with the insurance market, navigating the 2021 Fire Safety Act and 2022 Building Safety Act, which created further roles and responsibilities.
Following an RICS consultation in 2023, new wording was agreed in 2024. There is now increased insurer appetite and wider coverage being provided in the professional indemnity market. RICS have also pushed for fire safety and cyber cover to be in line with professional indemnity. Surveyors and construction businesses need to know the new minimum requirements of professional indemnity cover as to not be caught out.
What were the key changes to the RICS’s minimum terms of Professional Indemnity insurance?
The mandatory minimum limits of professional indemnity insurance and maximum excesses allowed are maintained as previously. The key changes by the RICS include:
- For buildings up to 4 storeys, cover remains on a full civil liability basis. Limits of indemnity continue to be permitted on an annual aggregate basis.
- For buildings 5 storeys and over, public liability is mandatory for fire safety claims. This applies via a retroactive date – 1st July 2024. Cover is on a negligent act, error or omission basis rather than full civil liability.
- For buildings up to 18 meters, professional indemnity insurance must now cover claims relating to EWS (the cladding external wall system report) and FRAEW (the fire risk appraisal of external walls report). This only applies to professional services undertaken on or after 1st July 2024.
What are the insurance implications of the professional indemnity changes for construction companies?
These changes are positive for both RICS members and the insurance industry.
Because of the retrospective date on buildings over 5 storeys or 18 meters, surveyors continue to be exposed for historic work. Surveyors will therefore need to continue to review their past exposure.
Surveyors must ensure they provide insurers and insurance brokers with detailed and accurate information to avoid any issues with claim notifications. Construction businesses should record all work performed to achieve the best possible terms.
With the changes, it’s clear insurance brokers have an critical role. Brokers will need to relay information and present risks to insurers, aiming to achieve the best cover and the best premiums.
Brokers will need to know the best third-party firms to work with, helping construction companies gain information about their projects and risks. This can then be condensed into a presentation, improving the terms and price achieved.
It is advised that construction companies and surveyors discuss these changes with their broker as early as possible. It is critical construction businesses engage with a dedicated broker, experienced in professional indemnity insurance and the field of construction.
Why use Romero Insurance
Stuart Dobbins, Technical Claims Director for Romero Insurance Brokers –
“A Professional Indemnity claim can be an extremely stressful event; the significant costs involved could threaten a business’s survival.
In such difficult and turbulent times, the service of a top award-winning broker should not be understated.”
Without high-level professional support a client may inadvertently undermine their own defence. A company should seek the best possible cover and support from the right broker, and Romero Insurance Brokers is best placed to protect businesses from complex, varied and extremely costly risks. Our clients take advantage of our 20+ years of experience and our dedicated professionals who fully understand the Professional Indemnity claims process.
If you would like to discuss professional indemnity insurance, please get in touch with our award-winning team.
