As the construction insurance market adjusts to shifting risk tolerance and increasing claims severity, insurers and adjusters are managing more complex losses, often against the backdrop of limited documentation, delayed discovery, and tighter regulation.
“In recent years, several insurers have stopped writing construction risks, while others have raised deductibles, some as high as £150k,” said Philip Roberts (pictured), director of construction and engineering at Sedgwick. “This shift has led to a marked reduction in attritional claims under £100k in the sector, which are possibly pushed down the line to public liability policies.”
Newer building techniques, such as modular construction, are gaining traction, but not without complication.
“Since 2016, modular construction has gained traction as a fast, low-touch, and cost-effective alternative to traditional building methods,” Roberts said. “From individual ‘pods’ to complete structures, currently, this particular area of the sector has a turnover of £15.9 billion and is growing at an estimated 4.2% per annum.”
But installation errors are common. “We are currently handling a +£10 million claim involving 400 modular bathroom pods, each containing the same single design defect,” he said. “The pods invariably need to be connected before they can be fully tested within the finished structure, and once assembled, it’s not easy to access the specific area that needs repairing.”
Since Brexit and COVID, labour shortages have impacted build quality across major UK markets. “Quality tradespeople are hard to find, and the good ones are busy and expensive,” said Roberts. “Penalties for delays put pressure on subcontractors to source more workers, who may not be adequately experienced or qualified.”
Meanwhile, theft continues to rise. “The theft of tools, plant and machinery is more prevalent than ever, from breaking into tradespeople’s vans to stealing large and heavy machinery, which are often left unattended and make easy targets.”
Adjusters frequently struggle with legacy claims where the original contractors are no longer in business. “The Insolvency Service reported on November 19, 2024, that the construction industry experienced the highest number of insolvencies in the 12 months to September 2024, totalling 4,264,” Roberts noted.
That collapse often erodes the evidentiary trail. “We’re managing a £6 million claim for a 350k sq. ft. concrete floor that’s failed,” he said. “The subcontractor who laid the floor has since gone into administration, making it challenging to determine if the cause can be attributed to poor design, concrete issues, or workmanship problems.”
Across older projects especially, incomplete documentation is a barrier. “Record keeping is generally an issue when managing construction claims for projects that are more than two years old,” he said. “Multiple layers of subcontractors – some sole traders, with varying levels of digital engagement – tend to provide inconsistent or incomplete site records.”
Digital tools are improving how risks are presented and claims are handled. “Claims management systems have significantly improved over the last decade. We can now accurately collect and share detailed claims data, MI, and trends, which is vital to understanding future risks,” Roberts said.
Drones and visual platforms, such as Matterport, also offer real-time value. “On a recent major loss, the fire services declared the large stately home a dangerous structure. A drone survey enabled us to set an accurate reserve within two days of the event, far faster than waiting for safe access.”
AI is also gaining traction. “When used correctly, it can help identify common construction defect issues, retrieve background reports, and collect feedback on new materials, products, and pipework,” he said. “AI must be accepted as part of the construction claims process and its potential explored before disruptors step in.”
Despite evolving safety expectations, smaller firms can miss key policy conditions. “Smaller building firms and subcontractors can sometimes misunderstand the details of their own insurance policies,” Roberts said.
“For example, there are strict requirements when carrying out hot works, where contractors are using blow torches and welding. However, once the process moves further down the chain, the smaller firm actually carrying out the work may have simplified risk management protocols, which inevitably fall short.”
Fire remains the most expensive category of construction claims. Yet perhaps more pressing are rising instances of workmanship-based disputes. “We are seeing a growth in defective workmanship claims, due to tight profit margins and contractors being more aggressive about recovering their money,” said Roberts.
“Many subcontractors assume project responsibility for delivering quality workmanship on a strict timetable, while only making a 5% profit. Once the profit margin is eroded, cash flow becomes a problem, and if there’s any delay, penalties become applicable, and that’s when mistakes happen.”
Roberts cautions that as risk continues to be pushed further down the supply chain, claims are only likely to become more complex and delayed, particularly when profit margins remain tight and documentation is lacking.
“Most contractors learn the hard way that insurance is not an ‘à la carte’ cheque book,” he said. “If all the risk is being pushed down the chain, claim costs will increase due to delays and a lack of information.”
For insurers and adjusters alike, the path forward lies in clearer risk profiling, stronger engagement with smaller contractors, and renewed emphasis on documentation and process, before the next generation of losses arrives.
