One of Queensland’s biggest building certifiers could be forced to put up the shutters if it is unable to secure a new professional indemnity (PI) policy as insurers maintain a blanket ban on exemption-free covers.
Building practitioners in Australia have not been able to secure policies free of conditions since Landmark Underwriting pulled out in July.
GMA Certification Group is presently in “caretaker mode” since its previous policy expired on Wednesday afternoon, MD Geoffrey Mitchell told insuranceNEWS.com.au.
Efforts to renew the policy with the existing provider have failed, as has the search for a new insurer.
“I don’t know what to do. My head’s in a spin. We just haven’t been able to get a renewal offer,” Mr Mitchell said this morning.
“We’re still desperately trying to seek insurance. We are allowed some exclusions but not the ones that’s currently on the policy although I’ll accept any bloody policy at present because I’ve got nothing.
“We are just holding. We can’t really do much but in essence if I can’t secure insurance in the next couple of weeks, it’s basically going to be out the door.”
According to Mr Mitchell, his business has been slugged with premium hikes over the years. The last policy charged $180,000 in annual premium for a $10 million protection against potential claims.
“It’s gone up progressively over the years from about $100,000 to about $180,000,” he said.
WA-based surveyor John Massey Group fears a similar fate is in store when its PI policy, which has no conditions, is up for renewal next April.
The family-owned business paid about $80,000 in premiums for the current policy, a $60,000 rise from the previous cover.
“So up until April next year, the company has no exclusions which means that the director of the company will not be personally liable for any claims at this stage,” Executive Director of Strategic Projects Ron Sherar told insuranceNEWS.com.au.
“But after April next year, if the insurance puts exclusions on our policy then [the directors] will be directly liable for any claims against the company for previous projects that we have worked on.
“If the [directors] become personally liable… then why would you operate a business?”
The situation surveyors are confronted with is one the insurance industry has long warned would transpire if nothing was done to address the problem of shoddy works that has been plaguing the building sector for years.
“This is a building and construction industry crisis. Insurance is at the end of the risk management chain, and the current situation reflects the fact PI insurance has been unsustainable since 2011,” Insurance Council of Australia spokesman Campbell Fuller told insuranceNEWS.com.au.
“Due to the volume of claims related to cladding and other non-performing building products, insurers have been losing money on PI insurance products since 2011. This is unsustainable.”
Australian Institute of Building Surveyors President Troy Olds fears for the industry’s future unless the situation turns around.
“The PI insurance crisis for building surveyors we predicted back in 2014 is starting to bite,” he told insuranceNEWS.com.au.
“Building surveying firms are closing due to inability to obtain insurance or they are forced to accept what is basically a junk insurance policy just to stay in business,” he says, referring to huge premiums, massive excesses and broad exclusions.
“This is all occurring in a climate where we are seeing an increasing number of spurious and vexatious claims against building surveyors.”