A Win, win for Architects and Homeowners
Architects struggle as Professional Indemnity Insurance renewals increase by over 200%
At Global, we have had lots of discussions recently with architects who are struggling with astronomical increases in their Professional Indemnity Insurance premium renewals. It’s been widely publicised that premiums have risen sharply but not everyone is aware of just how steep these renewal increases really are. In some cases, premiums have increased as much as 213%. That may seem completely unbelievable, but it’s true.
To make matters worse, architects generally have no choice but to pay these huge premiums and are finding that there can be restrictive exclusions being applied to policies that can have a potentially detrimental impact on how they practice in the future, leaving some architects in an impossible situation. Some of the top exclusions include cladding, fire safety, asbestos or contamination, pools or basements and building height restrictions. These exclusions mean that some projects are now simply off the table for some practices.
BUT…. That’s only the start of it, the premium consequences are much worse if you have a claim!!!
Because claims against PI policies require indemnity from the current insurer at the time the claim is made rather than the insurer at the time the error was made, insurers are naturally very cautious about what may or may not have been a business activity within the past 6 years and the relevant claims history. This means that the history is a very significant factor to insurers, and they therefore rate their premiums accordingly. For this reason, it is more crucial than ever to avoid any situation that could lead to a claim against the Architect’s Professional Indemnity Insurance. Even the allegation of an error or omission is enough to trigger years of further increased premiums without anything ever being upheld against the firm.
One thing that many firms are considering is no longer providing Professional Consultant’s Certificates (PCC). These certificates may well assist the developer/builder in the sale of the house but, whilst they may provide some comfort, they don’t provide the purchaser with any real protection in the event of an issue developing down the line, and simply expose the architect to an allegation for a period of 6 years.
This means that every PCC you issue has the potential to end up costing you thousands…… Is that really worth the risk???
Thankfully there is an alternative. Many architects are choosing to suggest to developers to source the additional protection and reduced risk that comes with 10 year structural warranty insurance in preference to PCC. Besides the fact that the purchaser has 10 years of insurance backed warranty on the structure, choosing a structural warranty offers reduced risk and peace of mind to other parties, including the architect and the lender, that simply are not offered when using a PCC to gain mortgage acceptance. There is reduced financial exposure to the architect, reduced potential reputational damage if problems arise and no exclusions on policies.
The overall costs may be a bit higher, but the purchaser has 10 year warranty offering them insurance backed protection and the lender is much happier that this can be availed of.
When architects choose to work with us at Global, it really is a hassle free experience. We help to make the application and proposal process as easy as possible. We assign a dedicated account manager, a dedicated surveyor and dedicated administration support for every project. This helps to streamline communication and saves you valuable time. If you talk to us about your project as early as possible, at planning stage or before ground is even broken, this can help to minimise premium costs.
Our multistage inspection process covers every key project stage. Our highly experienced Surveying team complete detailed survey reports on site, in real time. You have 24/7 access to these reports and all your project information. This means you get exactly the information that you need, when you need it. It also means that down time on site is minimized.
We talk to lots of homeowners who are trying to buy or sell properties which don’t have a structural warranty in place. This can be problematic and adds unnecessary time and expense to the buying process as most mortgage lenders insist that a structural warranty is in place before approving a mortgage. Buying a retrospective structural warranty policy is at least twice the price of a standard premium and most insurers have chosen not to even cover retrospective projects at all.
A structural warranty policy can offer reduced risk for architects, offers more protection for longer and reduces direct financial exposure. For homeowners and homebuyers, it means more cover for longer which is transferrable to subsequent owners.
Peace of mind and reduced risk for everyone. We’d call that a win, win! If you’d like to find out more about how Global can help with your upcoming projects, get in touch with our team here.