RIBA urged to do more to mitigate ballooning indemnity insurance prices in wake of Grenfell Tower fire

A Yorkshire-based architecture practice has reported an eleven-fold hike in the cost of its professional indemnity insurance cover as shockwaves from the Grenfell Tower fire continue to shake the market.

Gagarin Studio co-founder Gayle Appleyard’s social-media revelation about the practice’s latest PI bill prompted other architects to share their experiences of the ballooning cost of cover – and the impact of exclusions which are now being sought by providers despite the jacked-up cost.

Future of the Profession

Appleyard told Building Design that the latest 1,100% hike in PII cover for the Halifax practice was a significant increase on the annual doubling of cost witnessed by her practice in recent years and meant £2m of cover cost in the region of £18,000.

She said accepting exclusions – typically ruling out fire, cladding, basements and pools – would have resulted in a 500% increase in the cost of PI for the seven-strong practice’s work, but that full cover was its preference.

Appleyard said Gagarin Studio’s latest search for PI insurance had been conducted by the practice’s longstanding broker and its requests for quotes had been shaped by RIBA guidance.

“We don’t work with projects over 18m; we don’t deal with design-and-build or projects in isolation, and we were setting this all out clearly,” she said.

“We’ve got to have the RIBA lobbying and being the voice for architects and our shared experience.

“They’re aware of this issue, but I don’t think it’s front and centre for them. And it needs to be.”

Appleyard said an inevitable consequence of increasing PI costs would be rising fees. She also predicted a growth in the use of fire engineers on projects. She added that some practices would limit the scope of their operations to match the cover they could afford, while others may opt for the minimum level of cover they could obtain and essentially be uninsured for elements of their work.

Soaring prices for PI in the construction industry are closely linked to industry reappraisals of risk following the revelations about building safety and construction standards exposed by 2017’s Grenfell fire, which claimed 72 lives.

Paul Testa, of Sheffield-based Paul Testa Architecture, said his practice’s PI bill had increased by 500% and included exclusions for fire and disease for the second year running – although he acknowledged that turnover had grown and the level of cover had been extended to £2m.

Testa told Building Design he had not be too worried about exclusions to date because the practice’s main work involved low-risk residential projects. But he said the limited cover could have an impact for future growth in its social-housing work.

“Until legislation is sorted out and quality-control issues are dealt with, it’s hard to see what can be done,” he said. “In the meantime, I think an increase in fees will happen quietly across the industry to cover the extra costs.”

Darren Oldfield said his south-east London-based practice, Darren Oldfield Architects, had been unable to obtain PI cover without exclusions for the first time since it was established nearly a decade ago.

“We’ve managed to retain basement cover, but our exclusions are fire and cladding,” he said, adding that he wasn’t given an option on the exclusions.

“The cost is £3,600 for £1m of cover. Five years ago I was paying £500 for £500,000.”

Oldfield said he had spent around £1,000 worth of billable time filling out forms to take to brokers over a six-week period in order to obtain PI.

He added that it was “enraging” that the issues driving the increasing cost of PI were nothing to do with small practices delivering single new-build homes.

“It would be nice for RIBA to do something,” he said.

Last year former RIBA president Marco Goldschmied proposed the creation of a not-for-profit insurance provider for small- and medium-sized practices in the face of “extortionate” premium increases. He said the institute could play a co-ordinating role in putting together a business plan for the new mutual to be submitted to the Financial Conduct Authority.

Current RIBA president Simon Allford said the professional body was “fully aware” of the spiralling cost and declining level of cover provided by PI policies.

“That’s why we have formed a specific council expert advisory group, led by Jennifer Dixon, to drive forward action,” he said.

“In addition to commissioning a market review to identify and increase the range of mechanisms available to members for insuring activities, the group will lead a consultation process with contractors, brokers and regulatory bodies to advance understanding of the risks and liabilities of practice.”

Allford said open dialogue was critical to solving the PI problems being experienced by the industry, which he described as complex and cross-disciplinary.

“The advisory group will also produce a set of recommendations for regulatory interventions to reduce ‘unintended consequences’ – helping to guide the RIBA’s lobbying activity,” he said. “There’s work to do, and this is high on our agenda.”