• Sharebar
Contractors' All Risks
Thursday, August 28, 2014 - 02:16
Don’t cut corners

Regularly reviewing financial policies and contracts is vitally important, even in the engineering and construction sector. In order to ensure one is always in a positive financial situation, it is important to understand the risks associated with your business and review or adjust financial policies according to any major changes on a regular basis.

This is the advice of Lebogang Mashego, Business Consultant: Engineering at Lion of Africa Insurance, who says insurers cannot emphasise enough the value of being insured under the correct policy in line with their businesses products and offerings. “In South Africa, and other African markets, the engineering and construction sectors consist of specialised insurance policies, and as such have been underwritten by highly technical, competent and qualified staff,” explains Mashego.
For businesses and individuals alike, Mashego says insurance products are usually seen as a grudge purchase and are often the last expense to be ticked off on an income statement before an engineering project commences. “What many businesses fail to understand is the value of obtaining insurance, particularly engineering insurance, and often only learn this value after suffering huge financial losses.”
These businesses are known in the industry to be exposed to a higher risk and therefore it is imperative that they understand and identify all the risks associated with their operations before a project even begins. It is advised that a specialist be employed to identify risks and that the client disclose as much information about their business as possible in order for the correct policy to be recommended and implemented.
Furthermore, Mashego says clients may be tempted to withhold information or give the incorrect information with the intention of paying a lower premium. But, in the long run, if a specific element is not covered in their policy, a disastrous event could cause the client to find themselves underinsured or have their claim repudiated.
“We therefore encourage clients to disclose any inadequacies they may be exposed to, such as underqualified contractors or not having the required fire protection installed. Even having faulty equipment on site is taken into consideration for the underwriting process. These disclosures assist specialists in providing the best possible cover, giving the business owner peace-of-mind that they are covered for any risk they may be exposed to,” explains Mashego.
He adds that the guidelines in terms of underwriting common engineering risks at the Lion consist of two main criteria, which are developed using high level measures such as the severity versus the frequency of the hazards which the insured is exposed to.
“The low level criterion is applied using the risk profile of the insured which is developed using the acknowledged information. Criteria such as location of risk, type of construction or equipment, experience of contractors, claims history of the insured, and so on.”
With the high level and low level analysis, he says internal guidelines will then produce an optimal technical rate and policy structure. “The information gathered is then matched against market trends and conditions – for example in a soft market, the quoted premium can be a fraction of the premium obtained with a technical rate.”
Hence, Mashego says it is extremely important for the insured to understand the terms and conditions of their insurance policy. The engineering industry is complex on its own. “It is best for clients to obtain the services of a broker to explain the terms and conditions of the policy issued, especially in an industry such as engineering.”
 

Copyright © Insurance Times and Investments® Vol:27.8 1st August, 2014
785 views, page last viewed on February 18, 2020