Risk and insurance for builders

Health and Safety on-site – you have heard it all before, right? But have you considered the other hazards and risks you’re exposed to on a daily basis, both on and off-site? As a builder, when you get to site each day you’re probably thinking about your plans for the day, the weather and the materials available.

But events are taking place all around you. These hazards and risks exist 24/7 at and away from the site. How you identify and manage these exposures will often determine how successful and profitable the job or contract will be. It’s true, many of the practices and principles associated with risk identification and management have become engrained into your activities, adopted to comply with the Health & Safety at Work Act. This article is about wider exposures and using your health and safety practices to eliminate or minimise these as much as possible.

How to identify and manage your risks

Risk profiling is the identification and categorising of the risks to which you and your business are exposed. Your risk profile is developed by: • examining the type and level of threats that exist; • considering the likelihood of adverse events and the level of disruption and costs associated with each type of risk; • analysing your willingness to take risks and your ability to absorb these risks.

The results from this identification process are then used to manage risks and when this cannot be achieved in a suitable manner, the results will help you make insurance decisions.

Here are some areas of consideration when ensuring the basic precautions are taken:

Emergency procedures – Effective warning devices on hand; emergency procedures recorded and displayed; clear site access for emergency services; escape routes marked.

Fire protection – Early warning devices; extinguishing equipment and training to use; evacuation procedures; adequate water supplies.

Security – Site perimeter security; in-vehicle security; illumination, daily security check at the site; waste disposal and protection of hazardous material to prevent arson.

During construction – Appoint H&S and other roles required by law; keep mechanical equipment clear of combustibles; protection of and training to use equipment.

Temporary buildings – Maintain adequate separation from other structures and exercise caution with heating, cooking and smoking within temporary buildings. Hazardous substances on-site – Maintain current compliance measures including separation. Ensure security is appropriate for gas cylinders and similarly high value substances.

Electricity and gas supplies – Ensure compliant installations throughout the site and subject to regular checks, especially after alterations.

Hot work – Operate within the prescribed permit system, providing suitable extinguishers, scrutiny of work areas and cylinder storage facilities.

Waste material – Maintain good storage, housekeeping and waste disposal standards with adequate clearance from buildings and no burning of waste on-site.

Prioritising your risk management measures

Brokerweb Risk Services, have access to analytical data that will help you identify significant insurable exposures in construction and other industries. The data culminates in a hazard index table which rates twelve classes of insurance for your industry according to the likelihood and severity of losses. These ratings have been developed using historical claims and loss data for the building industry. It is recommended that additional factors specific to individual businesses, such as location and type of building activities, be taken into account when assessing this information.

Insurance Classes – Rated by Hazard Index

Work site safety, evidenced by Workers Compensation (ACC) exposures, is the most significant hazard rating. Improving these statistics was, in part, the purpose of recent health and safety legislation. However, hazard ratings shown on the table above demonstrate that other exposures can be mitigated by purchasing insurance.

What type of insurance do builders need?

This is a list of the top 12 insurance policies, rated according to their hazard index. There are other policies that may be important to protect you and your business. Consultation with an experienced insurance broker is very important and strongly recommended.

1. Product Liability Provides cover for your liability that arises from damage caused by products you have supplied.

2. Public Liability Insurance Protects your liability for personal injury to other parties and damage to property belonging to others. Often a Defective Workmanship extension is available which will provide some liability protection when you accidentally damage the property you are working on.

3. Property Insurance – plant, tools and equipment This policy covers your plant, ranging from heavy machinery to hand tools. Cover can be arranged under a variety of policies such as Material Damage, Engineering policies, Motor policies and others. Valuable equipment is by definition costly to replace therefore insurance is often an effective method to handle the risks on-site, away from the site and in your vehicle. This cover may also need to include hired plant, depending on the hire contract. Buildings, workshops, yards and contents (including those inside your vehicles) represent valuable assets of your business and should be insured. Proper sums insured need to be assessed to ensure the policy will respond in the way you expect, in the event of a claim. The premium will depend upon the value at risk, the construction, the security and usage.

4. Contract Works Insurance Will cover the work in progress at the site, material transported to the site and material stored away from the site. The cover will protect you and your Principal against accidental damage prior to completion, up to the practical completion date and often during the defects period.

5. Crime Insurance Provides cover for loss of money, materials or company assets as a result of fraud by staff or outsiders by internet theft.

6. Professional Indemnity This type of policy is designed to cover your legal liability, usually of a financial nature, incurred by giving negligent advice or through a breach of professional duty. If you perform any design or architectural work then Professional Indemnity insurance should be considered. 7. Motor Vehicle This type of insurance is generally understood; it covers theft or damage to vehicles and your third-party liability. It is important to insure all your vehicles as well as the leased vehicles that you are responsible for.

8. Machinery Breakdown Breakdown risks are often excluded from Property Insurance policies and many builders believe good maintenance practices will be adequate, therefore this type of insurance can be overlooked. However, an important extension will cover loss of income and additional costs, but only when Machinery Breakdown insurance is purchased.

9. Management Liability Insurance that covers exposures faced by directors, officers, managers, and business entities that generally arise from governance, finance and other management activities. Typically, this type of insurance includes Directors & Officers Liability, Statutory and Employers Liability, Employment Disputes, and others.

10. Cyber Liability This is a relatively new insurance product. Depending on the quality of the policy it covers internet based risks such as costs to recover your data following a security breach, the recovery costs after a ‘ransom attack’ or your liability for unintentionally transmitting a virus.

11. Transit Insurance This insurance will cover your materials and goods being shipped or transported by land, sea or air. Some cover is often provided as part of the Property Insurance however, when this is inadequate because of the amount of cover or the different nature of the goods then a specialised Transit Insurance should be considered.

12. Business Interruption None of the policies listed above will protect your profit if a serious event occurs therefore you may consider this cover for your loss of income and additional costs resulting from damage to insured property, such as specialised machinery and tools. This type of insurance can be referred to as ‘Loss of Profits’ or ‘Consequential Loss’ insurance.

To find out more give BrokerWeb Risk Service Limited a call today: 0800 644 444.

REDi Builders’ Insurance is administered by BrokerWeb Risk Services Limited and is exclusive to NZCB members. BrokerWeb Risk Services also operate the NZCB members’ only, Insurance helpline and can be contacted on redi@bwrs.co.nz or 0800 644 444.