Contractors urge market to better educate project owners on insurance needs and process

Experienced insurance buyers at contractor Bechtel have called on brokers and insurers to better educate construction project owners about what cover they really need for their risks, what protection is actually available, who is best placed to procure that indemnification and how. They also urged carriers to rejoin conversations to drive creativity and innovation within the construction market after they died down, and it has become more difficult to get cover. Mike Wilkinson, commercial manager for infrastructure and former risk manager at Bechtel, said the need to better educate owner clients about insurance needed for their projects has been required for some time now. He said the problem is particularly acute for public infrastructure projects but isn’t confined to that market. “We get requests from the owners that are ill-informed about the most efficient approach to insurance. And you can see buying insurance is just a tick-the-box exercise for them… so please can advisers and brokers do a better job at informing clients how to approach their insurance,” he told delegates at our Commercial Risk’s Construction Risk Management Europe Conference. Paul Aird, the current risk manager at Bechtel, was quick to make the same point and expand further. “We see insurance requirements that we think are a waste of money but the clients say these are non-negotiable and we have to price for this. It strikes me that brokers and insurers have a role in educating these clients about what insurance makes sense, what insurance is available and not available,” he said. “We continue to feel that PI insurance is misunderstood by a lot clients, for example. Some of the stuff we are asked to have we don’t think is available. One example of that right now is tech E&O. As a contractor, I don’t really understand why clients are asking us to buy tech E&O on top of PI. There is role for the broker both to educate the clients about what is good value for them, and if what they are asking for is reasonably available in the market,” he added. Aird said that this education should extend to who is allowed, or indeed best placed, to buy specific insurances. He believes buying insurance is often best left to contractors that know construction risk and construction insurance policy wordings, rather than owners who aren’t experts in the field. He pointed to delay in startup (DSU) insurance, which protects project owners for the financial consequences of a delay in project completion, as a case in point. “Owner brokers often suggest that as a contractor we cannot arrange the DSU insurance. That is not true. We do it a lot. We have a great track record on arranging DSU and I would say compared to an owner, we are better placed to understand the DSU insurance market,” said Bechtel’s risk manager. Adding: “The frustration with owner-controlled insurance versus contractor-controlled is we understand construction risk and they understand operational risk. We know the wordings. We know what is good and what is bad. We are not going to chase after lowest-cost insurers at the expense of poor insurance coverage terms.” He said conversations are particularly difficult when owners insists on placing the cover but still want contractors to accept the risk. “From our standpoint, if an owner wants to arrange the insurance and say our liability is limited to a deductible and anything beyond that is on them, then it is a much easier discussion. But what is frustrating is the owners that say they will do the insurance because they can do it cheaper but if anything is not covered by their insurance then the contractor is liable. That’s where we have a real problem,” he said. James MacNeal, panel host and global head of construction and infrastructure at broker Aon, said his industry does its best to educate project owners, but conceded that not all listen. “We do try. Most clients listen to us but others have their own ideas. Despite a bumpy ride from the soft to hard market, I think most clients now understand the need for quality technical information, what insurances they need and what is less essential,” said MacNeal. Wilkinson, who ended his stint as Bechtel’s risk manager in 2017 but has since stayed close to the function and colleagues from the insurance buying community, went on to urge the insurance market to rekindle the spirit of innovation that has waned over recent years. “I think some of the innovative conversations and brainstorming ideas we were coming up with to cover some of the risk on mega-projects that we are signing up to aren’t possible to have anymore. I am disappointed to hear that. We can’t build these multibillion dollar projects without adequately insuring the risks. But that is much harder now, not just because of the hard market but because there just seems to be a general unwillingness in the industry to be as creative and innovative, and reach out as much as it used to when I was a risk manager. So please join us in restarting those discussions,” said Wilkinson. We will host our second Construction Risk Management Asia Conference in Singapore on 17 October. To find out more click here.

Contractors urge market to better educate project owners on insurance needs and process

Owner-controlled insurance versus contractor-controlled

Want to read this article?

Read Next

Cloud providers pose ‘clear and immediate’ systemic risk, warns Tokio Marine HCC

Allianz Commercial names new UK head

KCC puts US wildfire losses at $28bn

France reportedly seeks changes to scope of CSRD

New political violence and aviation war underwriters at Westfield Specialty International

Cloud providers pose ‘clear and immediate’ systemic risk, warns Tokio Marine HCC

Allianz Commercial names new UK head

KCC puts US wildfire losses at $28bn

France reportedly seeks changes to scope of CSRD

New political violence and aviation war underwriters at Westfield Specialty International

Keep yourself informed

Sign up for Commercial Risk’s newsletters

Want to read this article?

Read Next

Cloud providers pose ‘clear and immediate’ systemic risk, warns Tokio Marine HCC

Allianz Commercial names new UK head

KCC puts US wildfire losses at $28bn

France reportedly seeks changes to scope of CSRD

New political violence and aviation war underwriters at Westfield Specialty International

Related Articles

Keep yourself informed

Sign up for Commercial Risk’s newsletters