The professional indemnity insurance crisis has hit the Australian construction industry hard with key stakeholders unable to secure renewals or bear the cost of higher premiums.
GMA Certification Group, one of Queensland’s biggest building certifiers, recently failed to renew their professional indemnity (PI) insurance policy, pushing the company into a ‘caretaker mode’ after the expiry of their existing cover, according to managing director Geoffrey Mitchell.
Australia’s building and construction industry, which is riding on projects worth billions of dollars, could potentially grind to a halt with several contractors unable to meet the higher cost of premiums, which have increased by 200-300 per cent. Additionally, tougher conditions and exclusions have only made the situation worse for the industry.
Insurance companies are trying to reduce their exposure to the latest problem impacting the industry – the flammable cladding crisis that arose following the Lacrosse apartment building fire in Melbourne as well as the devastating Grenfell Tower fire in London. The insurance industry blames the current crisis on failure to address quality issues in the building industry, resulting in a spate of claims related to the performance of various building products including cladding.
Consult Australia, which represents over 48,000 firms, has expressed concern about the PI crisis impacting the construction industry, which has not only affected building certifiers but also fire safety inspectors, building engineers and architects among many others.
The cladding register recently submitted to the NSW Legislative Council contains a list of buildings that have been confirmed to have combustible cladding as well as those assessed as ‘at-risk’ by Fire and Rescue NSW. Currently withheld from the public due to security concerns, the cladding list brings into focus the failure of successive federal and state governments to properly regulate the industry, resulting in the current PI stalemate.
Industry minister Karen Andrews has called for insurance companies to address the issue of higher premiums and also remove restrictions on professional indemnity insurance. The insurance industry needed to work with the Government to avoid a repeat of the HIH collapse in 2001, she added.
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