Soaring professional indemnity insurance (PII) premiums have had much of the UK consulting sector in a tightening stranglehold. Many firms have seen slender profits all but wiped out as a series of bad claims have soured insurers' appetite for civil engineering risk and bumped up the cost of insurance across the board.
Matthew Reed, business development manager at insurance broker Howden, says that premiums rose by at least 100% in 2002-3 and have remained at that level.
In the highest risk sectors of civil engineering - geotechnics and pollution management, for example - premiums soared by as much as 300%.
Howden has been vociferous on the issue of crippling PII costs over the last couple of years and is now setting out to help consultants manage and reduce risk, so bringing down premiums, Reed hopes.
'We know that better risk management does reduce premiums, ' he says. 'We're able to look at firms, map out their claims histories and gauge their risk profile. We can see the correlation between management strategies and claims.'
The firm had a long-standing partnership with the Engineering Council. It has now joined forces with its successor, the Engineering & Technology Board's 'information portal' Scenta, which is developing an increasingly large portfolio of web-based services. Together with other partners from the insurance, legal and financial sectors specialising in engineering and the built environment, Howden and Scenta are running a series of free seminars that will be broadcast over the internet. Seminars will take place in real time, with the audience participating via microphones and headsets plugged into their PCs.
These are intended to alert consultants to legal and financial developments or issues affecting the industry, pointing out potential pitfalls through the example of others' experience and, perhaps most importantly, helping consultants understand how the insurance sector actually works.
'If you have a group of consultants who understand risk and can put that understanding into practice, so getting fewer negligence claims, you should see premiums reduce, ' says Reed's colleague Andrew Bowyer. 'We're aiming to push risk management theory in at one end and get better risk management practice out at the other.
'Claims are often not cut and dried and cases can get complicated, so we're going to use real life cases to learn from.'
Reed is also planning an annual 'crystal ball' seminar, reviewing the year's insurance market developments - such as major claims or the entry of new insurance providers into the market - and trying to forecast their impact on premiums for the next. There will also be chaired question and answer sessions with a panel of experts, which will deal with any issues the seminar audience wants.
He and Bowyer are convinced that consultants' lack of understanding of insurers and the insurance market is a significant contributor to the high PII premiums they are charged.
'Few consultants realise that an underwriter sees perhaps 60 claims a day. So when a firm applies for PII cover it's important that it presents itself in the best possible light, ' says Reed.