Professional liability, what is important to know for 2024?
Jan 30, 2024
By: Miri Lebaher
2024 is already here and the changes in the world of construction insurance also concern liability insurance, including professional liability insurance for engineers, construction workers and construction workers. What are the highlights that are worth knowing, where is the market going and what awaits us? We will briefly discuss this in the following article.
Before we get into the nitty-gritty of things, it is important to note that one of the complex challenges facing professional liability insurance in Israel in 2024 is
These implications frequently work against policyholders, and elements that were until recently taken for granted become complicated. As of 2024, the direction appears to be one-way. Although the changes in the construction insurance industry are global, in the small Israeli market they have
Awareness of trends is important for understanding the changes in professional liability insurance in 2024 and beyond. The engineering, construction, and architectural community must take these matters into account as a key point. Whether in a thorough reading of the policy and its understanding, whether in the levels of disclosure when switching between policies, or – of course – in receiving advice and guidance.
By: Miri Levhar
2024 is already here and the changes in the world of construction insurance also concern liability insurance, including professional liability insurance for engineers, construction workers and construction workers. What are the highlights that are worth knowing, where is the market going and what awaits us? We will briefly discuss this in the following article.
Before we get into the nitty-gritty of things, it is important to note that one of the complex challenges facing professional liability insurance in Israel in 2024 is the lack of competition. Many insurance companies have stopped issuing or renewing professional liability insurance policies for engineers, civil engineers, and architects in recent years. As a result, and as the number of providers in the market decreases, there are dramatic implications for the competitive conditions of the free market.
These implications frequently work against policyholders, and elements that were until recently taken for granted become complicated. As of 2024, the direction appears to be one-way. Although the changes in the construction insurance industry are global, in the small Israeli market they have a particularly significant impact .
Awareness of trends is important for understanding the changes in professional liability insurance in 2024 and beyond. The engineering, construction, and architectural community must take these matters into account as a key point. Whether in a thorough reading of the policy and its understanding, whether in the levels of disclosure when switching between policies, or – of course – in receiving advice and guidance.
A surge in costs and worsening conditions – about 20% in just two years
The world of construction insurance has been in turmoil for several years, affecting almost every area. This is due to a change in trend on the part of reinsurers abroad, who are strict about treating minor as serious cases with Israeli insurance companies. Many policyholders are forced, in addition to rising prices, to even deal with refusals or violations of the terms of coverage offered to them.
Below are some key points that you should consider when signing agreements with work providers and renewing policies:
· Increase in premiums – In recent years, there has been a consistent increase in premiums for professional liability insurance for engineers, civil engineers, and architects. As experts in this field, we recognize an increase of approximately 20% in premiums for these insurances in a period of only two years.
· Disclosure period – Professional liability insurance includes a disclosure period. If the insurance company decides not to renew an existing policy (not due to failure to meet the insurance conditions and/or failure to pay a premium), it is obligated to provide coverage within the "disclosure period." If in the past, standard disclosure periods in the market were about 12 months, as of 2024, policyholders are forced to make do with half that time: only about 6 months.
· Extension to third-party coverage (for accidents not related to the professional "hat") – One of the important extensions in a professional liability policy is an extension to third-party damages in accidents not related to the professional role. For example, an architect arrives at a construction site to perform a senior supervision, and while walking around the site, he accidentally drops a ladder and injures a worker. The worker will receive compensation from the National Insurance Institute, but the National Insurance Institute may file a subrogation claim against the architect. If the architect does not have an appropriate extension in professional liability insurance, he may find himself without an insurance company behind him and facing a claim for significant amounts.
· Increase in deductibles – One of the most notable features of the changes in the world of construction insurance in recent years is the surge in deductibles. The phenomenon is clearly evident in contractor work insurance and has also reached professional liability insurance. An increase in deductibles from 40,000 shekels to 60,000 shekels (and more) is no longer a rare occurrence.
· Refusal to insure "high-risk" professions – The cautious trend of insurance companies produces refusals or stricter conditions for professions that insurers consider "high-risk" such as close engineering supervision, fire protection planning (sprinklers), safety monitors, etc. Some companies will agree to provide only partial insurance. For example, insurance for planning but not for on-site supervision.
· Difficulty in obtaining coverage for mass event approvals – Professional liability insurance also requires a solution for engineers who provide safety approvals for mass events. Given the climate that dominates the market today, insurance companies are reluctant (to put it mildly) to provide insurance coverage to an engineer who is required to approve the event. In Israel, where many mass events take place, which unfortunately also result in serious accidents, the difficulty in obtaining insurance coverage is critical.
The world of construction insurance has been in turmoil for several years, affecting almost every area. This is due to a change in trend on the part of reinsurers abroad, who are strict about treating minor as serious cases with Israeli insurance companies. Many policyholders are forced, in addition to rising prices, to even deal with refusals or violations of the terms of coverage offered to them.
Below are some key points that you should consider when signing agreements with work providers and renewing policies:
· Increase in premiums – In recent years, there has been a consistent increase in premiums for professional liability insurance for engineers, civil engineers, and architects. As experts in this field, we recognize an increase of approximately 20% in premiums for these insurances in a period of only two years.
· Disclosure period – Professional liability insurance includes a disclosure period. If the insurance company decides not to renew an existing policy (not due to failure to meet the insurance conditions and/or failure to pay a premium), it is obligated to provide coverage within the "disclosure period." If in the past, standard disclosure periods in the market were about 12 months, as of 2024, policyholders are forced to make do with half that time: only about 6 months.
· Extension to third-party coverage (for accidents not related to the professional "hat") – One of the important extensions in a professional liability policy is an extension to third-party damages in accidents not related to the professional role. For example, an architect arrives at a construction site to perform a senior supervision, and while walking around the site, he accidentally drops a ladder and injures a worker. The worker will receive compensation from the National Insurance Institute, but the National Insurance Institute may file a subrogation claim against the architect. If the architect does not have an appropriate extension in professional liability insurance, he may find himself without an insurance company behind him and facing a claim for significant amounts.
Increase in deductibles – One of the most notable features of the changes in the world of construction insurance in recent years is the surge in deductibles. The phenomenon is clearly evident in contractor work insurance and has also reached professional liability insurance. An increase in deductibles from 40,000 shekels to 60,000 shekels (and more) is no longer a rare occurrence.
Refusal to insure "high-risk" professions – The cautious trend of insurance companies produces refusals or stricter conditions for professions that insurers consider "high-risk" such as close engineering supervision, fire protection planning (sprinklers), safety monitors, etc. Some companies will agree to provide only partial insurance. For example, insurance for planning but not for on-site supervision.
Difficulty in obtaining coverage for mass event approvals – Professional liability insurance also requires a solution for engineers who provide safety approvals for mass events. Given the climate that dominates the market today, insurance companies are reluctant (to put it mildly) to provide insurance coverage to an engineer who is required to approve the event. In Israel, where many mass events take place, which unfortunately also result in serious accidents, the difficulty in obtaining insurance coverage is critical.
What to pay attention to in 2024 regarding professional liability insurance?
The examples we have presented here are just a few that hold the many. The tightening of conditions and the growth in costs affect countless other aspects of professional liability insurance. Purchasing professional liability insurance in 2024 is no small matter.
It is important that the purchase or renewal be made subject to receiving advice from an agency that not only understands insurance in general but also knows the nuances that characterize professional liability insurance for planners. Especially in light of the dramatic transformations and changes that have occurred in policies on the one hand and in the approach of insurance companies on the other.
It should be noted that the policy remains valid and renewed, as the insurance continuity is one of the important parameters in professional liability insurance, which is a "claims made" type of insurance. In other words, the insurance coverage depends not only on the claim but on the existence of coverage at the time of planning. In the case of planners and engineers in the construction industry, the planning date can also be many years back.
Additionally, if the insured decides to switch to another company that supposedly offers him the best conditions, he must know how to make the switch professionally. Among other things, by comprehensively complying with the disclosure obligation that applies to him, since the new company is supposed to provide him with coverage for past events as well.
The examples we have presented here are just a few that hold the many. The tightening of conditions and the growth in costs affect countless other aspects of professional liability insurance. Purchasing professional liability insurance in 2024 is no small matter.
It is important that the purchase or renewal be made subject to receiving advice from an agency that not only understands insurance in general but also knows the nuances that characterize professional liability insurance for planners. Especially in light of the dramatic transformations and changes that have occurred in policies on the one hand and in the approach of insurance companies on the other.
It should be noted that the policy remains valid and renewed, as the insurance continuity is one of the important parameters in professional liability insurance, which is a "claims made" type of insurance. In other words, the insurance coverage depends not only on the claim but on the existence of coverage at the time of planning. In the case of planners and engineers in the construction industry, the planning date can also be many years back.
Additionally, if the insured decides to switch to another company that supposedly offers him the best conditions, he must know how to make the switch professionally. Among other things, by comprehensively complying with the disclosure obligation that applies to him, since the new company is supposed to provide him with coverage for past events as well.
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