Engineering firms play an integral role in designing, building, and maintaining critical infrastructure, from power plants and bridges to complex computer networks and spacecraft. However, these companies face numerous risks in their daily operations, and one of the most significant challenges they encounter is obtaining adequate insurance coverage. This article delves into the complexities surrounding insurance coverage for complex engineering businesses, examining why it is often challenging to acquire and what can be done to address this issue.
The primary obstacle for engineering businesses is the potential high-risk nature of their work. Companies that design and construct offshore oil rigs, for instance, are exposed to numerous hazards, such as explosions, fires, and environmental accidents. Similarly, engineering firms that develop and test medical devices face potential legal liabilities, product recalls, and intellectual property disputes.
Due to the substantial risks involved, insurance companies approach providing engineering Professional Indemnity coverage with a high level of caution. The insurance industry is highly regulated, and underwriters must adhere to strict guidelines when assessing the risk of potential policyholders. In the case of engineering businesses, underwriters face several challenges:
- High levels of complexity: Engineering businesses often operate in complex environments, which can make it difficult for underwriters to understand the full scope of the risks involved. For example, a company that designs and builds a new type of jet engine will face numerous potential hazards, from material failures to design flaws.
- High levels of customization: Engineering firms frequently work on highly customized projects, which can vary greatly from one project to the next. This customization can make it difficult for underwriters to assess the risks involved, as they may not have experience with the specific type of project in question.
- Cost: Insurance coverage for engineering firms can be costly due to the heightened risks involved. The premium required to adequately price the risk exposure can make it challenging for smaller or start-up Companies to obtain coverage or the coverage limit they need to operate effectively.
So, what can engineer businesses do to address this problem?
There are several steps firms can take to make themselves more appealing to insurance underwriters:
- Establish a strong safety culture: The most effective way to reduce the risk of accidents and incidents is to establish a robust safety culture within the organization. By prioritizing safety, companies can reduce the likelihood of incidents occurring, which can make them more attractive to insurance underwriters.
- Develop a comprehensive risk management plan: Engineering firms should create a comprehensive risk management plan that identifies potential hazards and outlines procedures for mitigating them. This should also include contract management. By taking a proactive approach to risk management, companies can demonstrate to underwriters that they are taking steps to minimize the risk of incidents occurring.
- Maintain accurate records: To help underwriters accurately assess the risks involved, engineering firms should maintain accurate records of their past performance. By documenting incidents, accidents, and other relevant information, companies can provide underwriters with a more complete picture of their risk profile.
- Work with a specialist insurance broker: Engineering firms should collaborate with a specialist insurance broker who understands the unique risks involved in their industry. These brokers can help firms navigate the insurance market and identify the coverage options that best meet their needs.
In conclusion, securing adequate insurance coverage can be a significant challenge for complex engineering businesses. However, by adopting a proactive approach to risk management, maintaining accurate records, and working with a specialist insurance broker such as EngInsure may make the process more streamlined and effective.
EngInsure are here to support you with important PI Insurance advice and solutions to reach the best possible outcome for your business. For assistance, please get in touch with one of our specialists:
T: 1300 854 251
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of personal advice. Please contact Whitbread Associates Pty Ltd ABN 69 005 490 228 License Number: 229092 trading as EngInsure Insurance & Risk Services for further information or refer to our website.