The importance of orderly overlap in the rotation of insurance managers within the company
Sep 8, 2024
By: Miri Levhar
Unorganized turnover in construction companies of officials responsible for all insurance issues causes irregularities, sometimes to the point of exposing the level of insurance coverage in active projects, in projects that have been carried out in the past, and even in the business aspect.
Since this is a critical matter about which we have been receiving quite a few inquiries recently, and since it could have fateful consequences, we saw fit to dedicate the following short text to it.
Let's start with a small recent example based on a true story and not related to an insurance event . Not long ago, a client (from a large contracting company) contacted us who had completed a project and requested to receive from the developer the final payment he was due in the amount of approximately 250,000 shekels. The developer, as a condition for closing the final account, requested that he be presented with insurance certificates for the entire construction period. To the surprise of the company owners, it was not possible to "provide" the aforementioned certificates since the insurance was not extended as required despite our requests to the person responsible for this area in the company.
The reason for the "default" was due to a change of roles and an unorganized overlap during which the insurance was not renewed and/or extended as required.
The developer (the client), who apparently feared direct exposure in the absence of the aforementioned coverage, refused to transfer the final payment, claiming that he needed to "protect" himself against future claims that might be filed regarding events that occurred during periods when the site was not insured.
How does this happen and why? In many companies in the construction industry, the owners are aware of the importance of insurance, but in practice the knowledge and responsibility for handling the issue are directed to a specific person. The problems begin to arise when that person moves to another position or leaves the organization, and unfortunately, it is not always ensured that "the baton" is passed on professionally to his successor, however one is appointed (and there is not always one - sometimes it takes time).
By: Miri Levhar
Unorganized turnover in construction companies of officials responsible for all insurance issues causes irregularities, sometimes to the point of exposing the level of insurance coverage in active projects, in projects that have been carried out in the past, and even in the business aspect.
Since this is a critical matter about which we have been receiving quite a few inquiries recently, and since it could have fateful consequences, we saw fit to dedicate the following short text to it.
Let's start with a small recent example based on a true story and not related to an insurance event . Not long ago, a client (from a large contracting company) contacted us who had completed a project and requested to receive from the developer the final payment he was due in the amount of approximately 250,000 shekels. The developer, as a condition for closing the final account, requested that he be presented with insurance certificates for the entire construction period. To the surprise of the company owners, it was not possible to "provide" the aforementioned certificates since the insurance was not extended as required despite our requests to the person responsible for this area in the company.
The reason for the "default" was due to a change of roles and an unorganized overlap during which the insurance was not renewed and/or extended as required.
The developer (the client), who apparently feared direct exposure in the absence of the aforementioned coverage, refused to transfer the final payment, claiming that he needed to "protect" himself against future claims that might be filed regarding events that occurred during periods when the site was not insured.
How does this happen and why? In many companies in the construction industry, the owners are aware of the importance of insurance, but in practice the knowledge and responsibility for handling the issue are directed to a specific person. The problems begin to arise when that person moves to another position or leaves the organization, and unfortunately, it is not always ensured that "the baton" is passed on professionally to his successor, however one is appointed (and there is not always one - sometimes it takes time).
The situation in the construction insurance industry and the difficulty in creating insurance continuity retrospectively
The result is doubly serious in the current setting of the construction insurance industry in Israel (and around the world), when "mistakes" in maintaining insurance continuity can snowball. Failure to transfer insurance when an employee leaves or is replaced, and failure to perform appropriate and professional overlap, can become disastrous when it is already too late.
The "classic" case is when a claim is filed and it turns out that the issue of insurance coverage was not handled as required and requested, and now there is an insurance deficiency with all the implications that derive from this. Sometimes, as we saw earlier, there is also a danger before the accident even occurs (!).
We emphasize that the situation is even more complex in light of the great difficulty in creating insurance continuity "ex post" in the rigid atmosphere of the construction insurance industry in Israel. Since 2019 and at an increasing pace, reinsurers have decided to tighten the terms of construction insurance policies. This is following a series of reports on policies that created a chain of losses for the reinsurers.
As part of the lack of "tolerance" towards the industry, we are witnessing a "surge" in the amounts of self-participations, a general deterioration of conditions in the refusal to extend policies due to delays in schedules in retrospect , and of course - with real difficulty in "bridging" the gap in relation to the period that the site was not insured due to non-renewal and/or failure to submit an extension request for insurance (even if only in good faith).
The result is doubly serious in the current setting of the construction insurance industry in Israel (and around the world), when "mistakes" in maintaining insurance continuity can snowball. Failure to transfer insurance when an employee leaves or is replaced, and failure to perform appropriate and professional overlap, can become disastrous when it is already too late.
The "classic" case is when a claim is filed and it turns out that the issue of insurance coverage was not handled as required and requested, and now there is an insurance deficiency with all the implications that derive from this. Sometimes, as we saw earlier, there is also a danger before the accident even occurs (!).
We emphasize that the situation is even more complex in light of the great difficulty in creating insurance continuity "ex post" in the rigid atmosphere of the construction insurance industry in Israel. Since 2019 and at an increasing pace, reinsurers have decided to tighten the terms of construction insurance policies. This is following a series of reports on policies that created a chain of losses for the reinsurers.
As part of the lack of "tolerance" towards the industry, we are witnessing a "surge" in the amounts of self-participations, a general deterioration of conditions in the refusal to extend policies due to delays in schedules
In conclusion,
In any case where the person responsible for professional insurance changes positions or leaves, it is necessary to ensure that an orderly and meticulous overlap is carried out. This is of course in addition to ongoing checks regarding the validity of the policies at any given moment. At the Itzick Simon Insurance Agency, we will always be happy to be at your disposal for an orderly transfer of all the necessary information, in a joint meeting with the retiring person responsible and his replacement, or in any other way you choose.
Please, today more than ever, pay attention to the issue in light of the specific situation of Israel, which is under war, which affects construction sites and the entire industry.
We will clarify again that at the end of the day, the responsibility lies first and foremost with the owner, and they will have no address to hide behind at the moment of truth. Therefore, and accordingly, if you encounter a problem with your insurance coverage following this type of situation, you should consult with an insurance agency specializing in the subject as soon as possible.
It may be possible to handle the incident with specific steps, but this requires great expertise, creativity, and in-depth familiarity with the individuals operating both in the organization and at the relevant intersections in the insurance companies.
In any case where the person responsible for professional insurance changes positions or leaves, it is necessary to ensure that an orderly and meticulous overlap is carried out. This is of course in addition to ongoing checks regarding the validity of the policies at any given moment. At the Itzick Simon Insurance Agency, we will always be happy to be at your disposal for an orderly transfer of all the necessary information, in a joint meeting with the retiring person responsible and his replacement, or in any other way you choose.
Please, today more than ever, pay attention to the issue in light of the specific situation of Israel, which is under war, which affects construction sites and the entire industry.
We will clarify again that at the end of the day, the responsibility lies
It may be possible to handle the incident with specific steps, but this requires great expertise, creativity, and in-depth familiarity with the individuals operating both in the organization and at the relevant intersections in the insurance companies.
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