Technological advances are having a fundamental impact on how construction projects are executed and we are frequently asked how these changes are perceived by professional indemnity (PI) insurers. There are some important points to clarify:
1) PI insurance covers liabilities arising from professional services. In a construction context, this means services typically provided by construction consultants, such as architects, engineers and quantity surveyors. The policy does not cover non-professional services such as workmanship, manufacture and/or installation.
2) There are multiple ways technology can alter underwriters’ opinions of risks, including:
- Construction tools – The use of information technology to perform services, such as the technology involved in building information modelling (BIM) or using virtual reality (VR) for planning, are examples of how tools are changing processes
- Construction techniques – The application or integration of new technologies on construction projects could include technology associated with materials (cladding is currently topical in the UK), plant and equipment (green technologies), and/or processes (building and design methods such as modularisation).
PI underwriters recognise the benefits that new technological tools have brought to the industry. The use of 3D modelling software should go some way to reducing the frequency and severity of losses and this can only be good for both clients and insurers alike.
The risk for techniques is more challenging. Underwriters are optimists and normally give innovations a fair chance, as long as they are perceived to have passed the prototype stage.
However, if a technology develops a bad reputation (usually following claims activity), full coverage can be very difficult to secure. A great example of this is the waste to energy sector, where numerous eye-watering claims have left PI insurers paranoid of any future exposure.
For further information, please contact Andrew Harrison-Sleap, Partner on +44 20 7528 4711