Richard Forrest Smith, CEO of Markel UK’s specialist sector insurance provider, ECIC, outlines what new risks contractors might be exposed to and the importance of having the right insurance cover in place.
New risks are emerging for contractors as their business models have been forced to adapt to the pressures of the last 18 months. The construction industry, and more specifically, electrical contractors have reacted well throughout the pandemic.
Certainly many of our customers have been able to hold their own despite the challenges. During these difficult times, they have responded to market fluctuations and, when needed, changed the nature of the projects they have taken on.
Those electrical contractors with a diverse customer base combined with a mixed skill set have proven to be best placed to react to customer demand and opportunity whether it be residential, commercial or of a more specialist nature.
For example, when the hospitality sector opened up after lockdown, it placed huge time and cost pressures on contractors, whilst the residential market has been buoyant in recent months as homeowners improve their properties.
This ability to adapt has meant that electrical businesses remained robust by undertaking different types of contracts. However, the current industry trends and emerging pressures can bring new risks that need to be considered and protected against.
Material shortages are continuing unabated
As the ability to source materials at reasonable prices continues with no immediate end in sight we have seen instances where contractors have had to compromise and use unfamiliar or lesser-quality products.
With this in mind, it is important that contractors are trained sufficiently to fit new and unfamiliar equipment, or seek advice from the manufacturers. Recently firms have made claims where the incorrect fitting of equipment has led to property damage, including fires, as well as other serious incidents and injuries.
New trends will change risk exposures for contractors
The drive towards becoming carbon neutral is gathering pace. Many contractors are now regularly installing the latest low carbon and ‘smart’ installations and associated risks should be considered for these works.
A recent report by Electrical Safety First highlighted the industry issues that need to be addressed in relation to the installation of smart products for the home. The report highlights the lack of specialised and certified installers and registered electricians in the low-carbon space, and the potential health and safety risks from insulation or technologies as we rush to meet set targets.
The same safety risks often apply to electric cars and EV chargers. With many new EV installers coming into the market, specialist training is vital for safety. In many instances, training should be demanded as part of any agreement with manufacturers.
As consumers and businesses strive to be more environmentally friendly and energy prices rise, renewable energy is also becoming an appealing market. Again training is key as this sector too comes with its own specific risks, including working at height and in confined spaces. This is particularly relevant with an estimated 12,000 people a year needing additional training to meet the Government’s green targets.
Regulations, regulations, regulations
The electrical installation sector is heavily regulated, and this will only continue and evolve as new standards are established. For example, the new Electrical Safety Standards in the Private Sector (England) Regulations 2020 present opportunity as landlords update their property stock.
At the same time contractors will be aware that failure to meet their regulatory duties can result in penalties from bodies such as the HSE. Whilst insurance coverage may assist with defence costs, any failures can prove expensive and cause reputational damage to the contractor.
Shortage of labour continues to affect the industry
The shortage of skilled labour has hit the headlines in recent months as much as the shortage of materials. Many contractors have needed to increase the use of subcontractors and the temptation to employ insufficiently experienced staff may also be strong.
Contractors are responsible for the work that subcontractors undertake on their behalf and liabilities can arise should anything go wrong. Sufficient due diligence when selecting all subcontractors is therefore a must, and this includes checking they have adequate insurance cover to protect both the activity and scale of the project.
Electrical contractors face substantial daily risks, but awareness of what these are and how best to protect against them is a crucial step in safeguarding a business in today’s challenging circumstances. Due diligence, training, communication and clear documentation are often the key to significantly reduce and manage these risks for the contractor.
It is important contractors discuss any business changes with their insurer or broker, who may be able to offer guidance and to ensure the contractor benefits from the most appropriate insurance protection available.