JLT Research shows insurance claims in UK construction sector on the increase

10 October 2016

  • Claims frequency increases 20 per cent – despite reforms to litigation system
  • Average settlement time also sees sharp increase

The latest research into the UK construction industry carried out by JLT, the specialist insurance broker and risk consultant, has revealed that despite recent changes introduced to improve the way civil claims are handled, insurance claims within the construction industry have risen sharply compared to a similar research conducted in 2014.

JLT’s Employers’ Liability Claims Benchmarking report surveyed twenty-five of the UK’s largest building and civil engineering contractors, and analysed their insurance claims over a five year period between 2009 and 2014. This was then compared to similar research carried out in 2014 which looked at claims made between 2007-2012

Against a backdrop of civil litigation reforms introduced in 2013 following the Jackson Report, JLT found that claims made against construction firms between 2009-2014 increased by 19 per cent, compared to research carried out two years earlier. By contrast, the average cost of claims fell during the same period – down three per cent from £24,306 in 2014 to £23,700 in 2016 – possibly an early indication that the reforms are successfully managing to halt the increase in claims inflation.

The average time it took to settle a claim also rose significantly - up 11 per cent from 916 to 1007 days, which could be a consequence of the changes to claimant solicitors’ business models as a result of the Jackson Report which has subsequently increased caseload numbers.

Dave Cahill from JLT’s Construction Team, said: ‘Given the reforms introduced in the Jackson report, the rise in claims frequency is surprising. It is unclear whether these legal changes are working effectively for major UK contractors, and it’s possible we may not see this reflected in the data for another couple of years. Contractors hoping for an immediate improvement in the claims landscape are clearly going to be disappointed.

‘Whilst this period of uncertainty continues, our advice to building contractors is to use claims defensibility techniques to identify any weakness in the claims process and deliver improvements to procedures. This will ensure that claims leakage is kept to a minimum and that the total cost of risk is minimised.’

Enquiries:

Corinne Gladstone, PR Manager, JLT Group | Tel: +44 (0)20 20 7895 7705 | Email: Corinne_Gladstone@jltgroup.com

Notes to editors:

  • Claims were analysed over a five year period to 2014, and then compared to a similar exercise undertaken in 2016. Losses in 2015 were not analysed as they were deemed not mature enough on which to base any statistical analysis.
  • The number of claims was calculated relative to exposure – being the wage roll of the company in respect to employers’ liability. Within the analysis JLT calculated frequency as the number of claims incurred for each £10m of wage roll. This approach equalises the data to a common base level allowing comparison of participants.
  • More details about the changes introduced by the MoJ following the Jackson Reforms are available here.

About Jardine Lloyd Thompson

Jardine Lloyd Thompson is one of the world’s leading providers of insurance, reinsurance and employee benefits related advice, brokerage and associated services. JLT’s client proposition is built upon its deep specialist knowledge, client advocacy, tailored advice and service excellence.

JLT is quoted on the London Stock Exchange and owns offices in 40 territories with more than 10,600 employees. Supported by the JLT International Network, it offers risk management and employee benefit solutions in 135 countries.

For further information about JLT, please visit our website www.jlt.com.

About JLT Specialty

JLT Specialty Limited (JLT Specialty) is a specialist insurance broker and risk consultant, providing market leading industry knowledge and expertise in specialist fields to some of the world's largest companies.

JLT Specialty is part of the Jardine Lloyd Thompson Group of companies (JLT), one of the world’s leading providers of insurance, reinsurance and employee benefits related advice, brokerage and associated services. JLT’s client proposition is built upon its deep specialist knowledge, client advocacy, tailored advice and service excellence.

JLT Specialty’s Construction team places over £400m of construction insurance premiums annually within the London market, and is highly rated as one of the sector’s leading brokers. For more information on the work of the team click here.