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Liability insurance opportunities in the SA construction Industry

Odett van Jaarsveld, the Head of our PI and Single Projects underwriting team shares some of her thoughts about the opportunities for brokers in this sector.

According to Statistics SA, gross domestic product (GDP) from construction in South Africa averaged 51,407.83 ZAR Million from 1960 until 2016, reaching an all-time high of 109,411.71 ZAR Million in the first quarter of 2016. These statistics highlight the significance of the construction industry and the resultant opportunities available to insurance brokers.

Brokers would be forgiven for adopting a cautious approach to insurance in the build environment. A failure to appreciate the complexities and specialist nature of the risks could indeed lead to messy professional indemnity exposures for the insurance intermediary but the fact remains – the sector presents lucrative new business opportunities, particularly around the provision of specialist liability covers.

Brokers should aim to partner with an insurer that provides a holistic overview of the product in order to construct a tailor-made solution for their clients operating in the construction industry. Over the years, brokers were used to only having access to limited liability policies that just covered the bare necessities, but today’s products now provide more comprehensive solutions.

Insurance intermediaries, and subsequently clients, now have access to specialised solutions such as broadform liability – which covers a wider scope of risks that a broker can offer his or her client. This type of solution also ensures that all aspects of the client’s industry, whether it entails electrical, civil or structural engineering, as well as earthworks, are covered in a catch-all policy.

When it comes to insuring a single construction project, insurance advisors will need to err on the side of caution particularly when it comes to pegging the correct limits in respect of the liability covers especially where these limits are aggregated.. In a project situation one needs not only to look after the needs of the client, but also the risks related to the client’s suppliers and sub-contractors. These type of policies can be complex, but certainly not something that brokers should fear.

A specialist underwriter is often best suited to partner with a broker in constructing a tailored solution for their clients. This results in a clear, concise and transparent client liability solution – taking into account social, economic and legal factors

It is also important that the broker is actively involved in identifying and managing their client’s risk profile and ensuring that the client enforces proper risk management practices. Should there not be appropriate risk management in place, the broker might have difficulty selling their client to an insurance provider. The right insurer will also assist the broker to identify and manage potential risks related to the client’s core business.

In spite of difficult economic times, there remain huge opportunities for brokers in this industry in the form of infrastructure and renewable projects – even across Southern African borders. In these cases the broker also has to consider longevity of the insurance provider as many of these projects work well into five or even ten years of construction.

More brokers should be encouraged to take on business in this complex industry and it will be particularly exciting if we start seeing more young brokers involved in these type of policies. The ideal situation here would be for the broker to find the best offering for their client, while assisting to put proper risk profiling and management processes in place at an optimal cost that suits both the client and the insurer.

Although the construction industry can be difficult to navigate – even for the most skilled of advisers – the diversity of opportunities that it offers remains an exciting and potentially lucrative business opportunity for those willing to invest the time and effort.

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