Premiums set for price hikes

Contractors can expect a hike in insurance premiums next year following two years of relatively stable liability premium prices, according to insurance provider Zurich.

The anticipated increase comes as the costs and frequency of employer liability claims –which have taken three or four years to settle – start to kick in.

In 2001/02, premiums rose by an average of 65%. But between 2003 and the end of last year, the average premium increase stabilised at around 35%.

That percentage is expected to rise significantly in 2006 and beyond.

"Although the exact average premium increase is difficult to put into figures, there will be an upturn in prices throughout 2006," said Carl Gebhard, head of construction at Zurich UK Commercial.

"Claims inflation is currently in the region of 10%, with the average settlement for employer’s liability increasing by more than 100% in the past five years.

"In 2004, the insurance market witnessed more insurers prepared to underwrite construction risks and, as a consequence, rating increases reduced," Gebhard said.

"This means that premiums are likely to fluctuate in the short-term due to newly available capacity, but will continue to rise over the medium term.

"The contractors that will be hardest hit will be the ones that haven’t taken appropriate action on their risks, or haven’t addressed their claim history."

In preparation for harsher conditions, Gebhard echoed the National Federation of Builder’s (NFB) suggestion that contractors should think very seriously before switching insurance providers.

"Companies such as Zurich have stuck with the construction industry through thick and thin and we have built up good relations with the industry. We made promises to construction that we would underwrite its risks," Gebhard said.

"However, there could be companies out there that might not be offering the same service through another tough period."

More than a third (34%) of Zurich’s construction claims arise from incidents with machinery, tools or materials.

This is followed by slips and trips (21%); people being struck by an object/person (15%); lifting (12%); and falls from height (5%).

Gebhard said that occupational health still accounts for a significant proportion of employer’s liability claim costs and is an area in which there has been "little improvement".

However, he added that working in partnership is a good approach to help push down premiums.

This is evident in the 20% rebate Zurich offers to members of the NFB’s Construction Accredited Performance Standards (CAPS) scheme.

A similar rebate is expected to be made available to members of the Leadwork Contractors Association.