Insurance risk and new technologies

The impact of Grenfell and the increasing frequency and severity of insurance claims have created a challenging market for construction insurance in the UK, but the adoption of new technologies could help create a safer industry going forward, delegates at the Weightmans and GIRI webinar Rebuilding 2021 were told.

Rebuilding 2021: a new approach to insurance risk and the use of new technologies looked at the challenges for the industry in the year ahead, and the changing relationship between construction businesses and insurers.

Watch a recording of the webinar.

The past year has shown the strength of the construction industry in the UK but also some of its less attractive aspects, said Paul Lowe, partner at Weightmans, as he welcomed delegates to the event. “We have all been impressed by the flexibility the industry has shown in adapting to Covid-19, but at the same time the evidence that has come out of Grenfell has painted a less attractive picture of some of the industry’s historic failings.”

The impact of recent legal cases on the sector was explored by Weightmans partner Chris Doran. Chris reviewed several cases from the last year, covering topics that ranged from duty of care to design life to claim limitations, explaining the legal findings and the implications for the industry.

He was followed by Cliff Smith, executive director of GIRI, who considered the question of technology adoption by the UK construction industry and its role in error reduction. Opening his presentation by highlighting the need to reduce errors, Cliff noted that the UK currently lags behind other economies in construction productivity growth. “GIRI’s aim is to eliminate error. Eliminating error will improve productivity.” 

Cliff discussed the potential applications of technology to reduce error in five key areas identified for further investigation by GIRI research – offsite manufacturing, standardisation, error minimising components, improvement of construction processes, and automation – noting that adoption of certain digital technologies such as BIM is still in its infancy in the UK.

“Our latest research demonstrated the breadth and depth of technology availability and the varying levels of technological maturity in the construction sector. To learn from the conclusions and focus on the technologies that directly assist in error avoidance, we need to answer some fundamental questions: how does technology support existing best practice and how does it support ensuring that the right people get the right information at the right time?”

Cliff highlighted promising technological advances, including concrete strengthened with irradiated plastic flakes that can help reduce the material’s carbon footprint, the risk reduction potential of AI, the benefits that could be unlocked by data sharing, safety advances from the use of drones and robotics, and how both VR and AR can be used to great effect in everything from training to planning.

“The construction industry does not adopt technology as fast as other sectors, and to take advantage of its potential, culture change is required,” Cliff concluded.

Finally, Paul Lowe from Weightmans provided an overview of the state of the insurance market looked at the causes and possible future implications of this.

He shared some stark statistics. The cost of single project premiums in 2021 is three times what they cost in 2019. An estimated US$130m in potential capacity has been lost in the UK construction PI market in the last 18 months. And there are now only approximately 30 active insurers for construction compared with 45 in 2018.

There are several reasons for this: claims have increased in frequency and severity; there have been adverse historic claims developments (most notably around cladding); concerns regarding liability from design and build contracts; significant losses from escape of water and construction fire claims; and the impact of Covid-19.

Paul also looked at how the situation might develop in the future, including the impact of legislative changes, principally the Building Safety Bill, and engagement with insurers and industry in the field of technology. He suggested that collaboration on data sharing through the Construction Data Trust was something he could see the insurance industry supporting, as well as the opportunities to reduce error afforded by organisations like GIRI.

Finally, Paul touched on the possibility of government intervention. February 2021 saw the creation of a state-backed insurance scheme to tackle the obstacles faced by construction professionals in obtaining insurance cover. “The question is, could we see further government intervention in this area, or in the difficult area of building safety, and would it be welcome?”

For further discussion on the impact of Grenfell and the Building Safety Bill, come along to the next GIRI discussion forum on 29 March 2021. It's free and open to members and non-members.