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Challenges facing the construction industry

A short drive through a number of Australian suburbs at the moment displays a sea of scaffolding and shade cloth which would have anyone believe our country is in the midst of a construction boom. But those in the industry know the reality is a different story… the construction industry is currently facing the same challenges of the wider community with an economic downturn and a not-so-promising outlook.

Cyclical challenges have meant builders have had to make substantial cost cuts to several parts of their business, including cutting numbers of staff. Add to this the complexity of insurance premiums being driven up by natural disaster exposure; and unpredictable cost of materials, you have all the ingredients for a perfect storm in the industry.  

Cut corners, not cover

While cost-cutting is inevitable during a time of decreasing revenue, one area where businesses should not consider cutting back on is their insurance cover. According to industry expert David Turner, Chairman of HIA Insurance Services (HIAIS), “Natural disaster continues to be a big risk to the construction industry. We cannot deny the impact that bushfires and severe storms have on insurance premiums.” Turner highlights that even during times of relatively low peril such as the last few years, insurance premiums still might go up due to hangover from previous catastrophes.

When major natural disasters hit, insurers pay out large amounts of money for repairs, especially if they have insured properties, projects and businesses in the same area. This means they are forced to increase premiums charged to all customers to offset their costs, and these increases are phased over a number of years.

The worst thing you can do is cut costs on insurance in this economy,” Turner advises. As a carpenter and domestic builder before he joined the insurance side of the industry, Turner has a good understanding of what builders need because he once did it himself. “Small SME’s or builders can be affected by claims that could run into millions.”

In a nutshell, finding the right coverage for a builder can mean the difference between resting easy at night or being forced to shell out exorbitant amounts of money to pay for an uninsured accident. SME’s generally don’t have millions to spare, so a simple accident could prevent a company from remaining solvent.

Insurance for builders, by builders

So how does a builder get quality cover for their business without the costly price tag? HIAIS is a brokerage that is well placed to assist builders and tradies get quality cover at a competitive price, even in this hardened market. “We’re strong on claims advocacy,” Turner explains. Not only are HIAIS brokers construction industry experts, they are also experts in the field of insurance. So, when a client needs to file a claim, the broker will see it all the way through. Turner emphasises the importance of making sure builders have the right cover, “As a builder, you’re good at construction, but insurance may not be your area of expertise, so there’s a chance you’ll be prevented from getting adequate compensation if you do need to make a claim.” He believes it is HIAIS’ duty to help clients navigate the claims process if something does go wrong.

Beyond acting for clients in the event of a claim, Turner revealed that HIAIS also offers its clients elevated service by arranging cover that is designed with the needs of the industry in mind. An example of this is HIAIS’ new and improved Construction Works (also known as Contract Works) & Public Liability policies, which offer clients 2 tiers of cover to choose from: Platinum, which is the highest level of cover, and Gold, which is the competitively priced, but premium, level of cover.

Why have HIAIS taken this approach? Because they understand that each project has different needs and should be looked after differently. What may be right for one, isn’t necessarily right for another. Plus, to make things easier and faster for clients, both policies are available to buy online.

The Fine Print

Another important responsibility of SME’s – and even larger companies – is to read their insurance policies. Being knowledgeable about what is and is not covered is a good business practice. Being unsure about a specific policy or having questions is normal – that’s where HIAIS brokers are specialised to step in and assist. A popular example lies in hot works coverage. While most policies provide for hot works protection, such hot works protection may not be available if the terms of the policy require the builder to comply with the Australian Standards in order to be eligible for cover.

Although it’s been a rough market for builders, tradies, and subcontractors in the past few years, construction businesses can remain above the pack - and even thrive - during this challenging time until the market softens.

For more information on Construction Works (Contract Works) Insurance, visit http://www.hiainsurance.com.au/Products/Business-Insurance/Construction-Works-Insurance

© 2019 HIA Insurance Services Pty Ltd ABN 84 076 460 967 (HIAIS) as an authorised representative no. 275925 of Aon Risk Services Australia Limited ABN 17 000 434 720 AFSL no. 241141 (Aon).
Aon has taken care in the production of this document and the information contained in it has been obtained from sources that Aon believes to be reliable.  Aon does not make any representation as to the accuracy of the information received from third parties and is unable to accept liability for any loss incurred by anyone who relies on it.  The recipient of this document is responsible for their use of it.

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