A broker has proposed a novel approach that involves continuing risk assessment to overcome insurers' reluctance to insure building contractors .Michael Faulkner explains the strategy.

As the liability crisis deepens, the spot- light has fallen on the construction sector. Small subcontractors and building firms are being forced out of business owing to a lack of affordable cover. Insurers are being blamed and their aversion to liability risks is leaving the UK's industrial heartland in a perilous position.

Industry trade bodies have now been called in. They have been lobbying the government for a solution to the crisis in the form a Pool Re-type arrangement, but Whitehall seems to have little appetite to intervene on the basis that,there is no market failure.

And although the HSE has recently announced the formation of a steering group to examine ways to alleviate the crisis, any solution will take time to evolve.

Now it is up to those at the coalface, the brokers and their clients, to look for solutions, and last week the Beckett Group, the Suffolk-based broker, met with the National Federation of Builders (NFB)to explain their strategy for dealing with the NFB members ' problems. The Beckett Group acts for the NFB eastern region, whose members are builders and contractors from East Anglia and the north-east home counties.

The group proposes a risk management- based strategy as a solution to the challenge of securing members ' insurance cover.

This is an approach which has been developed over the years through its involvement with other trade associations.

It may ultimately prove to be a lifeline for NFB members, whose livelihoods are being threatened by the harsh operation of the free market.

According to the Beckett Group risk control manager, Jeff Alcock, insurers are very receptive to this approach and it has enabled them to place otherwise uninsurable clients. "The programme forms part of the insurance contract," says Alcock. "Companies will do anything to get cover, but once this is renewed, they lose interest [in risk management ].

We will guarantee that the programme is implemented, and insurers like this."

The level of detail in the report and the fact that the insurers are actively involved in the discussions also helps the group place its clients ' risks, says Alcock: "It gives insurers a better understand- ing of the business which makes them feel more com- fortable about accepting the risk."
In addition, the auditing and review process also helps the group improve its knowledge of the risk, which consequently helps it negotiate better terms.

"Insurers know when brokers don 't prop- erly understand the client's business," warns Alcock.

A further reason for the group's success lies in its system of monitoring. Risk is a dynamic concept: a company 's risk profile changes over time. It is an integral part of the strategy to undertake a continual process of assess- ment and review of each client 's risks.

"Many companies may follow health and safety procedures and have risk management systems, but they do not have a systematic way of controlling and monitoring these areas," explains Alcock. "Other companies may do risk assessments, but not review them. We do regular reviews and develop the programme accordingly." Alcock also stresses the importance of developing a culture of risk management within the business.

"[Insurers ] also have gone beyond the physical aspects of the risk: they want to know what the client is doing and their attitude to risk, the moral hazard," he says. Of course, the concept of risk management as an aid to marketing risks is nothing new.

But Alcock argues that insurers 'views of the risk management process are changing and businesses and their advisers need to react this in order to obtain cover.

"Risk management used to be reactive, arising post-claim. Insurers are now looking for a proactive approach, an up-front awareness of risk,"says Alcock.

"We get involved at the beginning and see things through." The main problem that Alcock perceives is overcoming clients 'scepticism of risk management: "Risk management is often resented. It is seen as costly and with little benefit."

"This perception must be changed," he says.

"Businesses must see that it is useful, that it provides an economic benefit and that it will enable them to obtain cover."

He continues: "People must start to address these issues. In the current market there is simply nowhere left to run." Jeff Alcock