At your peril?

- Trish White
- 15 Oct 2001
- Indicative reading time: 3 minutes

To write successful business in the increasingly accident-prone construction market, underwriters must be thorough in their assessment of a company and its management attitude, explains Trish White.

The Health & Safety Executive's provisional statistics for 2001 have
indicated an increase of 34% in fatalities for British workers, with 295
deaths compared with 220 in 1999/2000. Of these, 106 occurred in the
construction industry and were largely from falls from a height, moving
vehicles, falling or moving objects and objects collapsing or
overturning.

This is particularly disappointing for an industry that had made great
strides in reducing fatalities in previous years. So what can insurers do
to underwrite for profit in such an accident-prone industry?

Raising awareness

The answer is for them to focus on the management attitude and controls
within construction companies, to raise the awareness of the potential
dangers and to improve safety and standards in the industry - especially
in those economic cycles where skilled labour is in short supply.

Construction and site managers are constantly bombarded with regular legal
updates resulting from changes in European legislation and, along with
managers, insurers have a part to play in limiting their risk
exposures.

A structured recruitment, selection and induction process will help ensure
that only those who they feel will perform competently on site will be
employed. If there are health and safety concerns or breaches in company
standards, they need be treated severely. Similar structures can apply to
the selection, engagement and control of subcontractors.

By looking at the degree of hazard, the quality of the risk and the
attitude of managers, underwriters can then use these features to decide
the terms and premium discounts or loading merited.

At a time of uncertainty towards accident trends in the industry, there is
a danger of polarisation by the insurance market into perceived low hazard
risks such as new housing. Whatever strategic segmentation an insurer
adopts, the underwriter has to develop the skills to differentiate - at
the heart of the training on offer from many insurers.

Helping hands

As an insurance market, we need to ensure that we obtain the right levels
of premiums for risks, and reward those that have the sought-after quality
and management indicators. Some responsibility should also be assumed in
helping employers to ensure their employees have a safe place and system
of work.

Most accidents are preventable by supervision controls and safer systems
of working. There are many hazards to tackle as each contract within each
trade presents different dangers. Insurance surveyors are often said to be
the eyes and ears of underwriters but in translating the exposures and
accident frequencies inherent in the surveyors' risk assessment into
acceptable terms to the broker and client, the underwriter also needs
significant technical knowledge of the hazards and a realistic
understanding of site practices. If underwriters are presented with a
construction risk with a well-managed team at a head office location, they
must ensure at least the same level of control and safety is reflected at
each contract site.

Health and safety

Insurers are increasing their focus on the insured's compliance with
legislation and assessing the quality of risks both at inception and
renewal.

If the insured does not have a health and safety policy or the right
recording procedures for risk assessments, any ongoing training and site
security in place, for example, then they may not receive preferential
rating.

Risk assessment and resolution must become part of everyday life on
site.

Membership of trade associations that have admission standards, which are
audited and give access to training, are more likely to influence an
underwriter than those which are primarily marketing associations - even
if they do supply health and safety information. This could easily become
bombardment.

Following the increased number of fires on site, underwriters should also
focus attention on the use and control of heat application equipment.

Risks where control procedures are not in place become questionable as to
acceptance.

Security on construction sites continues to be a problem and this can be
caused by both the insured's own employees and subcontractors or by third
parties accessing the sites.

Good management on site by the main contractor should result in systematic
precautions and practical security measures that can be adhered to by the
entire workforce of direct labour and subcontractors. Underwriters might
look for appropriate personnel to be responsible for the security of all
equipment on site. Examples of this could include a signing in and out
policy for tools, or specifying what security equipment is required on a
piece of plant when hiring it in.

Underwriters must focus on these and other areas when assessing a
risk.

This will ensure that preferential exposure-related premiums are offered
to those construction companies that are able to demonstrate a good
attitude to managing risks and that can show evidence this is being
implemented on site - no longer just focusing on risks showing a good
claims experience.

Insurers will then be directly promoting better management and
responsibility in the construction industry, in the process of ensuring an
underwriting profit.

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