Pen's Perspective On… How Brokers Can Unlock Best Value For Construction Clients
Published On : 11 Jun 2020
BY SIMON FOWERAKER
Less is more, right? The notion of a small, quality amount of something often being much more effective than a large volume is generally a sound one.
Take today’s current working environment – where we’ve found ourselves forced to work remotely in isolation, rather than side by side. I’m sure that over the past few months we’ve all been guilty of over-compensating to some degree: perhaps over-complicating, over-communicating, and quite possibly over-using the cc function on emails.
But risk submissions are a different matter. Surely they should be a notable exception to the ‘less is more’ rule?
As every broker knows, we underwriters relish deep detail. For us, the greater the granularity of information we can obtain when evaluating risk, the better. And it’s not detail for detail’s sake. The better the risk information put forward for quote, the better the rate and terms we can apply. Which means client rewards could be substantial in premium terms as well as better matching cover to their specific needs.
This is certainly true in construction, particularly when it comes to insuring plant and equipment effectively. Yet we’ve also noticed a developing trend: risk information on plant exposure getting leaner, not fuller.
Quite possibly the disappearance of face-to-face client meetings coupled with the diversion of client attention away from ‘administrative’ matters like insurance is hampering brokers’ efforts to obtain the detail they need. Contractors will be wrestling with acute commercial pressures right now, not least the ability to hit existing project deadlines post-lockdown and a recession-reduced pipeline of new business.
Certainly, none of us should underestimate the current commercial challenge facing UK construction companies. According to the latest figures from the Office of National Statistics, a negative impact was being felt even in the earliest days of lockdown. Construction output decreased by 5.9% in March 2020 (6.2% for new work, 5.1% for repair & maintenance) compared with February 2020, falling to £12,720 million – the largest month-on-month fall in growth since monthly records began in January 2010. We’ve seen the impact first-hand too, with some clients making marked downgrades to their annual turnover forecasts, as they try their best to estimate the impact of having to close sites coupled with the potential ramifications of economic uncertainty.
But by providing detailed information on plant exposure, security measures and locations, construction clients could really optimise the underwriting rate applied, and open up the possibility of achieving some welcome premium savings at this exceptionally challenging time.
And yet the reality is that it’s now not uncommon to be presented with a single, solitary figure for plant: sum insured. And this really restricts our ability to underwrite effectively.
With just a few layers of detail we can begin to build a true picture of exposure. A plant inventory log enables us to better understand and rate the risk. For example:
•What security measures are in place on site and on the items themselves? Are there CESAR asset markings, immobilsers, tracking devices?
•What is the maximum exposure at any one site, and how many sites are there in total? With £1m plant known to be spread across 10 sites, your worst case scenario suddenly looks a lot different from an underwriting point of view.
•And what is the highest value piece of plant at each site, so we can pinpoint the maximum single-item loss?
All of the above will help us, as technical underwriters, to review the rate we apply.
It’s not complex, but the impact on premium could be compelling – especially in a hardening market.
Which brings us back to the ‘less is more’ phrase.
Often cited for its adoption by architect Ludwig Mies van der Rohe – a pioneer of modernism – the meaning he invested in the phrase looks at the issue through a slightly differently lens: simplicity and clarity lead to good design.
So perhaps we can apply the art – or architecture – of ‘less is more’ to underwriting construction plant after all.
The clarity we seek as underwriters is not convoluted; in fact, the additional layers of information are pretty simple and straightforward.
As a construction insurer with 20-plus years’ experience behind us and business that continues to be 100% underwriting-led, we want to be able to offer the best possible, justified rate to our clients.
Yes, we definitely need more than just a total sum-insured plant value, but for that detail to produce good ‘design’, the key will always be simple, straightforward numbers and clarity on where the real exposures lie.