The Insurance Institute of London is making early preparations for a development upturn with a new report to inform contractors, lawyers, property consultants, developers and the insurance market of the benefits of Inherent Defects Insurance.
At present there are only 12 underwriters insuring against potential inherent, or latent, defects in new buildings, and between 1985 and 1990 only some 10% to 12% of new buildings applied for cover. But the IIL sees room for growth.
The National Economic Development Office’s 1988 Building Users Insurance Against Latent Defects (NEDO BUILD) report recommended the promotion of an insurance market to settle inherent defects claims. Insurance could offer a cheaper and swifter means of settling such disputes than the traditional court action route, NEDO argued.
Norman Alderton, director of Sedgwick Construction Services and leader of the IIL Advanced Study Group, comments: “We are aiming to inform the insurance market about IDI and lay the foundations from which we can move forward and see the development of a new insurance class.”
Demand for IDI has been slim in recent years due to the lack of construction activity along with developers being unwilling to pay premiums of up to 1% of construction costs throughout the recession. “Confidence in the insurance sector needs to grow – the report will begin to instil that confidence,” commented Alderton.
