Marcel de Jager, Head of Engineering at Western National Insurance
The construction and engineering industries are not having the easiest time. When the economy is poor, these sectors are particularly badly hit.
Over the past decade the South African economy has grown at an average annual rate of 1.4% per year. These are not ideal economic growth rates in an emerging market. The construction and related industries are one of the most impacted sectors in these tough economic times, and as a result, experience ongoing job losses, lack of skill development and large reduction in investments.
Over and above the tough conditions the construction industry has to contend with, the worldwide market has been hit with Covid-19 and the local lockdown has resulted in uncertainty and a negative outlook for the industry.
The construction industry has, in recent times, struggled with challenges such as economic downturns, government regulation and skills shortages.
At Western we believe the strength of our business is in our relationships with our broker and intermediary base, our technical skill, product range and our consistent approach to the market. Our commitment to our clients and brokers is demonstrated by the recent Covid-19 actions implemented and communicated. It is all designed to support our clients across all segments and products of our business.
A tough market means that the correct and adequate insurance is even more essential as your clients will not have the cash reserves to be able to deal with the crippling effects of a loss.
Large amounts of capital are needed to complete projects. Delays and extra costs are an ever-present concern and continuous risk for your clients. Contending with generally accepted risks such as crime and the natural elements, among other important factors, makes engineering insurance a complex, important policy for all clients to have.
While it is essential to ensure your clients share the full extent of what they need covered, as their broker, you should also have specialist knowledge of the industry your clients operate in, and the insurance cover required. Not a task for the fainthearted, particularly in this complicated sector.
Engineering insurance cover is fortunately designed to specifically deal with all the unique risks inherent to this industry.
How to get it wrong
Not understanding your clients’ business
This is the most basic and important aspect of any insurance policy and client-adviser relationship. In order to apply the correct risk management, cover selection and limits, a full and detailed analysis of clients’ business is critical. Common mistakes include:
- Not understanding your clients’ requirements related to the contract types. For example, a civil versus a renovation contract.
- Limitations in the policy wording.
- Not understanding the additional cover and extensions available on the product.
- Unique differences in wordings.
- Conditions and exclusions specific to the applicable policy.
How to get it right
Understanding all the facets
From the aspects of cover required to the potential impact on the business should something go wrong, everything that can and should be covered needs to be considered. If you understand your clients’ business and contractual obligations, and clearly understand the products available in the market, it makes for well-structured success.
Here are some key considerations:
- What kind of cashflow cushion the client has, and if they can afford to carry or sustain part of the loss.
- It’s important to understand the roles of the principal, contractor and all relevant parties.
- You must have a full understanding of the contractual requirements to successfully complete the contract. Failing to know the Ts and Cs is likely to result in a mishap that could become problematic.
- Pay attention to cost and risk exposure during the period of the contract.
The Western National Insurance approach revolves around upskilling our partners as we have demonstrated during this lockdown period with the numerous online engineering-specific training sessions that we continue to hold. We believe in supporting our brokers every step of the way, as engagement is core to our business.
Think insurance. Now think again.
Western National Insurance Company Ltd, affiliates of the PSG Konsult Group, are authorised financial services providers. (FAIS: Juristic Reps under FSP 9465)
