Architects have called for a radical overhaul of the market for professional indemnity insurance (PII) as they grapple with soaring costs, increased paperwork and tighter restrictions on building specifications
The AJ has spoken to a number of practices which have faced difficulties renewing this cover, which protects them against financial claims in the event of a costly error on a project.
Earlier this year, Leeds-based architect Mark Hide warned that the profession was facing ‘a horror story’ on PII. His practice, Mark Hide Associates, had struggled to secure suitable cover for fire risk in the wake of the Grenfell Tower tragedy and subsequent focus on building materials.
The problem has now grown to such an extent that a survey by the Architects Registration Board (ARB) into the issue received more than 1,000 responses.
Ali Mangera, director at Mangera Yvars Architects, claimed his practice had been hit with a hike in PII premium of more than 800 per cent along with a lower level of cover.
‘We have never had a claim and we run our office on certified quality procedures, which minimises risk to ourselves and to our insurers,’ he said.
‘Talking to our brokers, we understand many other architects will also have massive increases in their premium in the coming months. The reason we understand is Covid-19 and Grenfell Tower.’
Although Mangera said his firm remained busy, he warned that the insurance situation could prove to be a ‘tipping point’ for some practices. He urged moves to encourage more competition in the market for PII provision.
Nick Willson, founder of Nick Willson Architects, said his PII costs had doubled overnight despite a mammoth administrative process to prove low risk levels.
‘I had to fill in a lot more forms this time around and had to provide information, clarification and confirmation about work on certain types of projects – especially the aluminium composite material and metal cladding systems,’ he said. ‘We hadn’t been involved in any of these.
‘We also had to state if we had been involved in any basements and swimming pools. Again we hadn’t. However the premium still went up.’
The cover Willson was given could also restrict his designs, potentially impacting bids and attempts to boost the sustainability of projects.
‘The most worrying thing is there is a bit of a grey area surrounding the cladding systems and what constitutes fire retardant products, designs and what is still a more traditional cavity wall type construction,’ Willson said. ‘This was the hardest bit to understand in my new policy.
‘Potential projects and cladding designs will now require extra interrogation to make sure that I am not falling foul of the policy.’
Stanhope Gate Architecture principal Alireza Sagharchi said the practice, which employs 25 people, did not get involved with any cladding work and had never claimed on PII.
Insurance quotes were a staggering four times the previous premium
‘To our surprise, on renewal, our current insurers declined to cover for any work involving basements, and our broker only managed to get two quotations out of some 15 enquiries – and at a staggering four times the previous premium,’ he said.
After trying a number of other practices and their brokers, Stanhope Gate eventually found a premium and policy with which it was happy.
‘My disappointment is ultimately with the RIBA and the ARB who, despite their claim of representing the profession, are essentially powerless in lobbying the brokers and underwriters who are placing severe restrictions on practice,’ said Sagharchi.
Arita Morris, director at Child Graddon Lewis, said insurance companies had raised the risk profile of architects since the Grenfell Tower tragedy.
‘There has to be a rethink to the PII model,’ she said. ‘Like many other practices, we have seen our insurance premium increase by several hundred per cent with restrictions placed on renewal terms, a rise in excess and exclusions on coverage for façade design and fire safety claims.
‘Clearly this will prove an unsustainable situation for many practices and will hamper the profession’s ability to provide services. It is also worrying for many clients and affects all consultants, contractors and sub-contractors.’
She said the insurance model was ‘misaligned’ with design development and called for project insurance rather than ‘a series of overlapping individual insurances’.
But she warned: ‘Just how we change a risk-averse insurance industry to one that can assess and price risk in an entirely different way will be extremely tricky.’
Nigel Ostime, director of delivery at Hawkins\Brown and co-chair of a Housing Forum working group looking at improving construction output quality, said PII costs were pushing up architects’ overheads at an inopportune time.
‘Premiums are going up and that is hurting,’ he said. ‘There is never a good time for overheads to rise. But with Covid-19 we are facing the mother of all recessions so it is going to be difficult.’
Ostime ran a roundtable with insurers, brokers and other stakeholders to push the quality promotion ideas in his Housing Forum report, including the idea of a ‘kitemark for quality’ to bring down premiums for certified practices.
‘It all comes into one pot of producing good quality buildings, managing risk more effectively and keeping insurance costs lower,’ he said.
‘It could be a two-tier system – if you can demonstrate you are a lower risk then you should get a lower premium. It could work like a no-claims bonus for well-behaved practices.’
Ostime said insurers were interested in a system that would demonstrate certain companies were meeting specific quality criteria. These practices could enter a ‘premiership of consultants’ he said, qualifying for lower premiums. The emphasis would then be on companies in the sector to show they can work effectively consistently.
‘It would be things like clearly understanding client briefs, managing projects more closely and building defect-free on sites. We have to roll our sleeves up and do things a bit better. The Housing Forum report has 14 recommendations in project order.’
Ultimately Ostime called on the government to lead change in the way the industry operates.
‘The construction industry is not very collaborative,’ he said. ’There is a virtuous circle not happening because of things like design and build contracts. Can we change the procurement route to more collaborative partnering arrangements?
‘Now is a good time to do it. If we come out of the coronavirus with suicidal fee bids then we won’t be producing better quality work. We need to come out with different ways of working. It has to come from clients and the government, as the biggest client, can lead the way.’
The ARB said in a statement: ‘We know the PII market is difficult at the moment. We invited all UK architects to complete our survey so we could better understand their experiences of purchasing/renewing their insurance and the impact PII market conditions are having on practice. Responses are being analysed at the moment and will be used to guide our regulatory approach in this area.’
It added: ‘Our role is to protect the public and maintain trust and standards in the profession. We aim to support architects through regulation as we do so. We appreciate the current difficulties are not exclusive to architects in the construction sector, and are connected to the global insurance market. The aim of this survey is to aid our understanding of the extent of the issues so we can take effective action within the scope of our remit.’
RIBA executive director for professional services Adrian Dobson said: ‘The financial and insurance markets have been severely disrupted by major events including the Grenfell Tower tragedy, and now the global coronavirus pandemic.
‘Insurance premiums have increased dramatically and are likely to rise further in the short to medium term. Some insurance carriers have withdrawn from the architects and construction PII market, and many PII policies now exclude fire-related claims.
‘The RIBA is on hand to support members through this very challenging period. We continue to work with the insurance market to try and achieve a consistent minimum level of cover for fire-related claims and are offering advice to practices and individuals. We strongly urge practice leaders to make early contact with their insurance brokers, keep thorough documentation and review their insurance policies.’
An Association of British Insurers spokesperson said: ‘We recognise the difficulty that some building and construction professionals, including architects, are experiencing in accessing appropriate and affordable PII cover for fire safety work.
‘The industry has been clear that in the long term there needs to be fundamental reform of building regulations to provide clarity on roles and responsibilities of those involved. Until this occurs, we will work closely with the government, the RIBA and others to understand concerns and discuss whether there are any alternative solutions for the short term.’