The rising cost of insurance is having a huge impact on the bottom-line of contractors, with some firms in the sector seeing increased premiums of over 10% year on year since 2018. The roofing industry, in particular, has felt the pinch of these premium hikes, with contractors dealing with spiraling costs leading to decreased profit margins and in some cases, the business becoming unsustainable.
In 2022, a Construction Leadership Council (CLC) survey found that construction contractors were struggling to afford suitable insurance and that around a fifth of professionals were spending more than 5% of their annual revenue on insurance. Of course, with the continued rising cost of living, economic turmoil and threat of a recession, things have done little to improve in the last 2 years.
As a result, businesses are often left with the extremely difficult decision of absorbing the increased premiums into their business overheads or passing these costs to the customer, which in turn risks them securing the contract if price is a deciding factor. Continued financial pressure in the sector is predicted to slow industry growth, with companies reducing unnecessary expenditure on equipment, training and staffing.
Why are roofing contractor insurer premiums rising so severely?
- Claims are on the rise
The very nature of dealing with hazardous locations, dangerous heights and sources of heat make roofing an extremely high-risk activity for insurers to cover. There is an increased chance of accidents occurring during construction works as well as the potential for costly damage to the property. A substantial rise in claims being paid out inevitably means that insurers have no choice but to increase customer premiums in order to continue the viability of their insurance products.
- Increased material and supplier costs
In every part of our lives, costs have risen significantly over the last few years and materials are no exception. Rampant inflation, severe disruption of supply chains due to COVID, Ukraine and even Brexit have all had an impact on the price we pay. So, not only are insurers dealing with more claims than ever before, they’re also paying out substantially increased costs for each claim too.
- Fraudulent claims are on the up
Like any financial sector, the insurance industry is unfortunately prone to misuse and deception. In 2022, insurance fraud teams identified over £1.1 billion in falsified claims, with a belief that a similar amount goes undetected every year. Insurers have to account for this vast expenditure as well as investing heavily in specialist investigation teams and cutting-edge technology to tackle the issue. This multi-billion pound outlay regrettably affects premiums for all customers.
- More extreme weather
As climate change begins to take effect, weather in the UK is changing. This may result in more severe weather events including storms, hurricanes, hail, etc, all of which are likely to increase the number of insurance claims made by roofing contractors. As a result, premiums will increase accordingly.
- Insurers leaving the sector
In difficult economic trading times, many insurers are removing their risk appetite for the high-risk industries or are exiting the insurance sector completely. This means there are fewer insurers competing to offer the best prices to their customers and finding a good deal in an unstable market becomes much more challenging.
What is being done to protect roofing contractors from insurance price rises?
At present, there is sadly very little Government assistance on the horizon, although those in the industry remain optimistic that as the economy settles down, so too will other contributing factors. Whilst in the short-term, the reality is that premiums are not likely to come down, there are small signs that premium growth may be starting to stabilise with potential increases not so drastic as in previous years.
In the meantime, there are affiliate parties who are advocating for action to address the continued threat to the construction sector by insurance price rises. The National Federation of Roofing Contractors (NFRC), The Federation of Master Builders and other trade bodies are taking steps to ease the issues, looking at new insurance schemes and price increase caps amongst other initiatives.
What can you do to lower your insurance premiums?
Having appropriate insurance is an essential factor in successfully running your business. Some products such as Employer’s Liability insurance may be legally required, whereas others are totally optional, but highly recommended to ensure you are protected should something unforeseen or unfortunate happen. You should always consider how you would cope if an incident occurred and someone made a large claim against you. Would your business be in a position to deal with the financial losses and legal uncertainty that could arise? For many companies, especially smaller contractors, the consequences would be absolutely devastating, with the real possibility of the company ceasing trading. Therefore, many businesses prefer the peace of mind that insurance gives them and it is simply not an option for them to consider having no cover in place.
Here are some top tips from our specialist brokers that will help you mitigate the rising cost of roofing contractor insurance:
- Risk management and safety processes
Insurance quotes are calculated by looking at risk factors. The lower the risk, the lower the quote. Quality training, risk management and safety procedures will help you lower the risks, which in turn decreases the likelihood of claims being made against your policy. Many insurers will take this information into account when quoting and seek evidence of your arrangements as part of your insurance policy.
- Tailor your contracts
By specialising your services, you can change the level of risk required to be covered on your insurance (e.g. target lower insurance activity markets or specialise in a business direction that attracts larger, high value contracts). A policy which covers you for a very wide range of services is always likely to cost more, as the risks are significantly increased.
- Consider industry accreditations
There are many benefits of joining an industry association, including their ability to push agendas affecting their members. They may be able to encourage regulation and legislation changes that would have a bearing on the insurance issues currently impacting the sector.
- Greater awareness and collaboration
Construction projects have always been a joint effort. From architects and planners to surveyors and project owners, communication and teamwork is key. An increased awareness and understanding from third parties could help push forward changes with a view to reduce risks during roofing construction (e.g. an architect designing the roof specifying using a cold applied system). This would benefit all parties, in time leading to greater safety, fewer claims and reduced insurance costs.
- Check you’re getting the best deal
If you’ve renewed your policy with the same insurer for a number of years, you may benefit from shopping around, as we still find that not every insurer rewards loyalty. A specialist commercial insurance broker can help you compare cover and premiums across a wide range of insurers from their panel, making sure you find an affordable premium with suitable protection.
- Find an all-in-one package
It’s highly possible that you’ve taken out multiple insurance products with different insurers and brokers. This means you could be paying much more than you need to, particularly if each insurer or broker is adding fees on top of the premium. By seeing if you can combine essential cover under one policy, it’s likely you’ll see a cost reduction, plus it makes managing the policy so much simpler, with just one point of contact.
- Consider paying monthly for more manageable instalments
Whilst it may not reduce the cost of roofing contractor insurance (some finance is subject to interest), it might be worthwhile considering paying your premium by monthly direct debit. Paying in full can be a big hit to your overheads in any given month, but paying in bitesize chunks allows you the security of knowing that you’re covered, whilst managing your cashflow.
How can QMT Commercial help?
With no guarantee that insurance premiums for the construction sector will be coming down any time soon, it’s even more important that you’re getting a good deal. Why not let our experienced commercial broking team help. We can audit your current policies, identify any potential gaps and provide tailored insurance solutions. What’s more, we’re a one-stop-shop, so if you have any other business insurance requirements such as a fleet or HGV, we can cover those too, keeping everything all in one place with a dedicated account manager on hand to help. Simply call us on 01227 285540 to speak with one of our friendly advisors today.
