Can you dig it?

According to statistics provided by the National Plant and Equipment Register (TER), a company that tracks down stolen plant for a finder's fee, the value of equipment reported stolen to the TER in 2005 was worth £43m - a 20% increase over 2004. This is just scratching the surface as there is around £200m woth of plant equipment circulating in the UK alone, with around 9000 items stolen each year, worth £66.25m. Many items are stolen to order. With this amount of equipment going missing, it would be reasonable to assume the registration of equipment would be a high priority, yet TER only manages to register between 20% and 40%, or around 500,000 items worth £2.6bn.

TER has struggled to attract interest from a series of key groups in the industry, including insurers, contractors, brokers and plant hire companies, making its task that much more difficult.

Tim Purbrick, manager of TER, is scathing about insurers' attitudes towards the assessment of the value of plant equipment. He says: "Insurance in this area is done on an ad-hoc basis. The insurer relies on the contractor to value their own equipment and the temptation is there to undervalue it. Therefore, the insurer has no idea of what they are insuring." Purbrick continues: "This is an unacceptable and diabolical situation."

Some insurers, such as Zurich and Allianz Cornhill Engineering, have made an effort to offer discounts on premiums to clients that agree to have their equipment registered at TER, however, there is frustration by the lack of take-up from clients and brokers.

Stefan Bramwell, construction underwriting manager at Allianz Cornhill, says: "There is an inhibition to register because of the model of the TER. For other databases there is an upfront fee, whereas with the TER, registration is free but if the item is recovered it charges 30% (sometimes this is 50%) of the item value."

Defending Purbrick's criticisms about insurers not knowing what they are insuring, he responds: "We know who we are insuring - these are bona fide businesses." Bramwell also expressed dismay about the cost of looking up items on TER's database, including used equipment - £5 an item, or £25 for due diligence checks. Despite a campaign earlier this year by Allianz, which works with over 1000 brokers in this area, to offer a 15% discount to join the TER he says the reaction has been "lukewarm". When pressed if TER could be made compulsory, the response from Bramwell is that insurers would then see their books of business disappear.

Lack of detail

Setting the politics of registration aside, the lack of registration or clarification is even more remarkable given that 65% of losses of contractor's plant are as a result of theft.

Carl Gebhard, head of construction and engineering at Zurich Commercial, which deals with hundreds of brokers in this area, admits one of the problems is the lack of detail the insurer receives from the client. Gebhard comments: "At the annual review there is an estimation of the hiring charges." These can then be updated at the end of the year. He adds revealingly: "There is a lot of trust." Purbrick compares insuring a car driver to insuring a contractor's plant and finds it incomprehensible as to the differentiation in the amount of information presented.

Gebhard warns that loss ratios are deteriorating and for matters to improve all stakeholders including the plant hirers will need to work together. Plant, such as mini-diggers, has been intercepted on the way to Amsterdam, Africa and Eastern Europe. Criminals have also begun to disguise vehicles and re-identify vehicles by changing number plates and even engine numbers.

Eastern Europe is a particular concern because, according to Bramwell, around two-thirds of the workforce at the Olympics will be Eastern European. Ian Elliott, a police liaison officer and a member of the Plant Theft Action Group set-up by the Home Office, says the potential of plant theft at the Olympics is "massive" adding "our construction equipment is wanted everywhere."

There is another factor that creates difficulties for TER - around 80% of equipment used by contractors is hired. Although each contractor should obtain insurance for each piece of equipment, the hire companies often do not register the plant in the first place - so there is no record if it subsequently goes missing.

There are other significant problems for tracking stolen equipment. The average policeman cannot tell if a piece of equipment is stolen or not. The equipment is often yellow and without specific markings. Elliott comments: "90% of our equipment is yellow and to the average policeman they all look the same." This issue is compounded by the fact that one key fits all equipment, which again is a unique scenario playing into the thieves' hands.

Cornwell, senior technical project manager at Aon Risk Services, says: "The best way is to stop it being stolen in the first place by using physical security." This can be done by increasing site security or introducing physical markings onto equipment.

Another issue is that some machines have overload alarms that sometimes go off by accident - subsequently they are turned off and made redundant when they are necessary.

Purbrick warns: "Most sites have the security of a wet paper bag". The Home Office 'Secure Your Motor' website offers advice such as "Make sure the site itself is secure, with fencing, lighting, CCTV and security guards. Cut off all electricity and make sure the keys are somewhere safe. Display security posters." There are 10 points of similar advice, all seemingly obvious, though it appears it is being ignored by many. Tellingly, the Home Office also says: "Register all major plant and attachments with a recognised company database." However, insurers will not insist on this and therefore the incentive is reduced. Another alternative is for the site owners, for example councils, to tell contractors that they are not allowed on site unless their vehicles are registered or have markings.

Stolen equipment

What is being stolen? According to the TER, the most stolen equipment is excavators, and there are a range of items from telescopic handlers to backhoe loaders, as well as tractors, dumpers, breakers, rollers and fork lift trucks. Unfortunately, the recovery rate is poor, a miserable 5%, while the average value of equipment stolen is £9800. Last year, the most expensive recorded item to the TER was a £98,000 Komatsu Loading Shovel stolen in Shropshire.

Police forces which were kept especially busy last year were the Thames Valley Police (269 thefts). Metropolitan Police (232 thefts), Essex Police (210 thefts), Kent Police (196 thefts) and Surrey Police (185 thefts).

What is done with the equipment? Stolen excavators can be used to break up cash-in-transit vehicles or in the theft of ATMs from banks.

There is some hope, as TER is one of two companies competing to administrate the National Registration Marking Scheme - which will again be voluntary. However, in addition to the registration of vehicles there will also be central marking. Professional Broking understands the tender, being competed for by two companies, should be completed by the end of the month. If all manufacturers then used the scheme, there could be a dramatic improvement in tracking the plant.

For brokers wishing to operate in this market, Gebhard says that specialist knowledge and expertise will pay dividends. Major insurers competing in this space include HSB, Allianz Cornhill Engineering, Norwich Union, Royal & SunAlliance and Zurich, as well as London market players.

In addition to international powerhouses Willis, Aon and Marsh, there are hundreds of provincial brokers competing, with larger pools in Edinburgh, Glasgow, Leeds and Manchester.

There are two ways to insure equipment. First is through the contract works policy and second is to place the plant separately. An estimation of the value of plant being used is given at the beginning of the year, and this is reassessed at year end with a declaration adjustment.

Bramwell says plant is often lowest on the priority lists of brokers. He says: "The broker needs to give the insurer more time. By the time we get to look at it (plant equipment) it is often too close to renewals - brokers concentrate on areas such as liability - which I can understand. However, although the premium spend is the smallest, it can cause the biggest losses and as result the premiums will go up."

The total annual gross written premium of constructional plant is around £70m, according to Bramwell, with the average premium spend against total value of equipment of around 1.5%. Bramwell says: "If the equipment is worth £100,000, then cover will be between £1750 and £2000. Everything is covered, including fire, theft, accidental damage and flooding."

Gary Thom, a senior engineering underwriter at Norwich Union, highlights an opportunity for brokers. He says: "There is a substantial amount of uninsured plant. The challenge for brokers is to present the positive features of insuring these risks."

So, will any initiatives work in stopping the thieves and keeping track of the equipment? They cannot make things worse. Despondently Purbrick says: "We might have made more progress if I had bashed my head against the wall. There is no joined up concerted effort." Time is running out to ensure that plant theft will not be the Olympics' Achilles heel.