AIBS Member Statement - Professional Indemnity Insurance Update
27 September 2019
Professional Indemnity Insurance Update
This statement is to update members and provide information on the work being undertaken by AIBS relating to the current Professional Indemnity Insurance crisis faced by the building surveying profession.
What is AIBS doing?
Following the Building Ministers’ Forum (BMF) in July, AIBS wrote to every Minister responsible for our industry in each State and Territory across Australia. Our letter said we supported the Ministers’ commitment to long term change in building regulations which, if implemented properly, would help to stabilise the industry and potentially encourage renewed confidence of the insurance sector.
We also expressed extreme disappointment that nothing the Ministers had done so far will help building surveyors struggling with insurance problems right now. We pointed out that since July the problem has worsened with insurers deserting practitioners working on high value projects and commercial buildings over three storeys. We requested an urgent meeting with each of the Ministers.
Since then, AIBS CEO Brett Mace and AIBS Board Directors in each jurisdiction have attended meetings with Ministers and/or their advisers around the country. We have also provided background briefings for other Members of Parliament who have requested information, including the MPs conducting the NSW Upper House Inquiry into Building Quality.
AIBS also attended a meeting with the Senior Officers Group who represent the BMF and we provided a written submission to their options paper. This relates to possible Professional Indemnity (PI) Insurance options in the medium and longer term, but unfortunately there are no solutions being tabled to address the short term.
AIBS has also continued to alert the general public through the news media to the insurance problem and how it could impact industry if nothing is done to fix it.
What can governments do?
We are advising them that both short and long term measures are required to fix the PI insurance crisis.
Long term, reform of building regulations will restore confidence of the insurance industry in Australia’s building and construction sector. This has long been required but has been put in the too hard basket by governments. The AIBS Policy on Building Regulatory Reform in Australia describes in detail what is needed for long term industry stability.
Additionally, a report titled Building Confidence by Professor Peter Shergold and Ms Bronwyn Weir, was released by the BMF in early 2018. AIBS supports the 24 recommendations of the report and the commitment by the BMF to implement them.
AIBS has advocated for governments to support a Professional Standards Scheme for Building Surveyors. Such a scheme would raise the bar on standards for the profession and, in turn, provide greater confidence for consumers and some stability in the insurance market which it has done for other professions faced with similar issues.
AIBS is working with the Professional Standards Council to develop a Professional Standards Scheme for Building Surveyors through which we aim to increase the professionalism and integrity of building surveyors who act in a statutory role on behalf of government.
AIBS is pushing governments to take action right now to stabilise the situation. A good start would be a nationally consistent Government funded combustible cladding rectification program, similar to that introduced by the Victorian Government.
As we all know, the issue is now far greater than just cladding and extends to a lack of confidence in the industry in Australia generally. This includes non-conforming products and the range of recent building failures in Australia for one reason or another or even for reasons as yet unknown. The only solution over the longer term is reform of Australia’s building regulations.
We are also advocating governments engage directly with the insurance industry to agree on mutually acceptable ways of immediately restoring confidence and stabilising the building and construction sector. In the short term, governments may have to consider underwriting the industry themselves until confidence is restored to ensure consumers and building professionals are protected.
What can AIBS members do?
Since July, the PI insurance market has tightened even further, specifically for industry practitioners working on high rise projects over three storeys. We have been advised by Bovill Risk & Insurance Consultants (BRIC), the main PI insurance broker to building surveyors and other building professionals, that insurers who remain prepared to underwrite building surveying risks have indicated they want to reduce their exposure and, in some cases, withdraw completely from this particular area.
This now means that any building surveying firm that has, or has had, projects over three storeys or other large projects, are going to find it increasingly difficult or may even not be able to obtain PI insurance.
A number of firms have already advised they have been unable to obtain insurance. This has resulted in drastic measures including searching off-shore for insurance. In one example, a policy ultimately cost around $550K where previously the same policy was $80K. This is not sustainable.
In contrast, some firms have reported small increases in premiums and conditions, but these are in the minority and their work is mostly on low rise, smaller residential projects with little or no historical exposure going forward because of previous notifications. What this means is that we are likely to see experienced and senior building surveying firms go out of business simply due to the type of work they undertake, to be replaced by smaller, under-resourced and less experienced building surveying firms on major projects because they still have insurance. This will only be in the short term before those firms or practitioners too will eventually experience the same insurance problems.
Unfortunately, this severe pressure on insurance will not ease in the short term. AIBS will continue to work hard to find solutions for you. Meanwhile, you can:
- Mitigate risks of claims through high standards of professional practice;
- Do all that you can to ensure that as far as possible you (and your customers / the community) are fully insured;
- Where full insurance cover isn’t available, take appropriate steps and measures necessary to protect long term financial stability and the community;
- Ensure that, in the event no insurance is available, a planned and appropriate exit strategy is in place to facilitate ongoing financial stability and community protection;
- Develop detailed and comprehensive risk management plans for your firm that may provide confidence to insurers that you are reducing your risk; and
- Ensure your personal and family assets are protected.
In addition to the above guidance points, AIBS recommends you obtain personal financial advice in conjunction with legal advice around your particular situation.
Troy Olds Brett Mace
AIBS President Chief Executive Officer
A PDF of this Member Statement can be downloaded here
A PDF of the letter sent to Ministers can be downloaded here