Clients often ask me: “do you have professional indemnity insurance” (PI Insurance)? The short answer is “yes” we do. It isn’t cheap: we pay over $20,000 per year in premiums – last year was about $27,000. But the long answer is, while we do have insurance: you cannot rely on it.
Here’s why:
- Insurance companies are not in the business of paying out. Their business model consists of collecting premiums (up front), re-investing those premiums, earning a return on the “float” as well as profiting from any claims that are not paid out. In order to minimise their costs, they are incentivised to fight claims.
- The procedural / documentation issues: in getting a pay-out is very high – it is almost impossible for anyone to meet these requirements. If a claimant cannot access the insurer’s honey-pot, then you’re stuck without a paddle.
- Subrogation: You’ll have to claim from me, I will be required to notify the insurance company, and then they will grab the steering wheel off me and takeover – i.e. “subrogation” occurs. Since the insurance company is the one who will be paying out, they must necessarily do this to safeguard their interests.
- The costs of pursuing a claim are very high.
- If there is a successful payout – such firms will be black-listed in the insurance market, they won’t be able to get insurance, consequently they may have to go out of business. The mere existence of a firm, lasting 15 years, is indicative of their quality.
- At Tek1, we limit our liability.
- Building and construction is usually collaborative endeavour. If a project goes wrong, everyone gets dragged into the fray. Most firms cannot afford to pay for the costs and mistakes of third parties.
In summary, while we have insurance, both you and me cannot rely on it.
The best protection is prevention: mitigate risk, and take care, and ensure all parties are equally vested to achieve the desired outcome.
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