Getting the right insurance cover should be your new year’s resolution

Richard Forrest-Smith, CEO of ECIC, is urging contractors and businesses offering electrical and mechanical services to ensure they have the right cover in place for 2021. He says it’s often not until contractors come to make a claim that they realise the true value of their insurance protections. Here he outlines why and offers top tips when choosing contractor insurance.

The saying goes “things can only get better” and remaining optimistic that the New Year will be better for the construction industry, and contractors that work within it, means being ready for all eventualities.

Electrical and other specialist building services contractors face numerous potential risks against which they need to properly protect themselves, their business, their clients and their employees. The pandemic has also affected the industry, meaning that many contractors are taking on new types of contracts to get through the crisis, some of which may materially change the profile of their business.

And when it comes to claims for accidents, the statistics for injuries and fatalities released by the Health and Safety Executive (HSE) in November 2020 show that workers in the construction industry experienced 61,000 non-fatal injuries and 40 fatal injuries in the year 2019/20. In total, around 2.8% of workers suffered an injury – mainly slips and falls, and falling from a height. Statistically this is significantly higher than the rate experienced by all other industries.

As economic pressures grow because of COVID-19, it is likely that businesses will also become more aggressive in seeking redress for contractual disputes and other losses, something that typically results in an increased incidence of both public liability and professional indemnity claims.

  1. Find a good broker: If possible one that works with other construction contractors and understands the industry. They will be able to provide advice based on the type of trade, typical project type, size of the business, whether contracts are public or private sector and so on. Other contractors may be able to recommend a broker they use.
  2. Full disclosure: Contractors must ensure they explain to their broker or insurer the full range of their activities and how they manage the risks associated with their business. Any contractor seeking insurance has a legal duty to make a full and fair presentation of their business to an insurer. Brokers can explain this requirement in more detail and what information is needed.
  3. Understand your limits: An insurance policy is a contract which details what is covered and what is excluded, the financial limits, control measures required and other terms and conditions. Contractors need to fully understand this they should ask their broker or insurer to explain covers and limits in detail.
  4. A change in business is a change in risk: Contractors must update their broker about any changes in their business, and not wait for renewal to do this. During the past year, due to COVID-19, many contractors were forced to change the type of contracts they worked on. Moreover, if the type of work has changed and the insurance amended to reflect that, contractors who return to their previous contract type mustn’t forget to change their insurance back.
  5. Check your subcontractors’ cover: Contractors using bona fide subcontractors must check that the insurance cover their subcontractors have in place is adequate for the work they are undertaking.
  6. Compliance for every contractor: Everyone involved in a project must be aware of, and understand, their responsibility for health and safety, and the necessity to comply with any specific insurance policy conditions or requirements. Regular reminders as part of toolbox talks are a good idea.
  7. Audit trail: Comprehensive records of all training given and instructions about contracts and incident reporting should be kept. Ideally signed papers for electronic records should be maintained. A contractor’s insurance broker should be made aware of all incidents so they are able to offer expert guidance and support on any steps that need to be taken.
  8. Site safety assessments: Prior to any work being undertaken at a given site, risk assessments and method statements must be shared with workers to ensure they are aware of risks, contractor measures and the personal protection equipment needed.
  9. Legal expenses insurance: With the cost of legal disputes in UK construction at an all-time high and tribunal cases rising sharply in the past year, consider taking out legal expenses insurance specifically designed for the contractor market. Look out for policies that cover trade supply contract disputes, trade registration protection and trade operator’s license disputes, as well offering trade and engineers’ regulatory protection.
  10. A-rated: The financial strength of the chosen insurer should be checked. Insurers receive ratings from credit agencies based on financial analysis of the company and its operations. With all the disruption of the past year some insurer’s service standards are also under pressure. A broker can offer advice on these important aspects.

Taking time to ensure that a business has appropriate insurance cover in place is vital. Claims can be unexpectedly turned down if a contractor doesn’t have the right cover, which can prove disastrous for all concerned. Get the right advice and take out cover with the scope needed and the contractor can get on with looking after their business worry-free.

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