After all, subsidence is a result of unstable foundations and who better to stabilise them than an underpinning specialist? While in theory this makes sense, in practice the figures prove otherwise, as a steady stream of contractors turn their backs on the insurance sector.
Ever since subsidence became an insured peril in 1974, insurers, loss adjusters, project managers and contractors have been keen to innovate. Subsidence claims involve a number of people and processes, they can be complex, lengthy to resolve and are often costly.
According to the Association of British Insurers (ABI), average claim costs vary between £4000 and £9000. Insurers would like to see subsidence claims closed within 12 months and are keen to source faster, smarter and less intrusive solutions.
Some underpinning firms believe insurers have engineered their specialism out of the solution in a bid to cut costs and speed up the claims process. Insurers' current procurement models favour national contractors above regional specialists (although in many cases they sub-contract to meet demand), resulting in fewer suppliers being able to provide the required large-scale solutions.
With smaller contractors being squeezed out of the equation and greater emphasis on mitigation and superstructure repairs, there is less underpinning work to go round.
In the surge year of 2003, the ABI reported that 54,100 subsidence claims were notified. About half were repudiated, leaving insurers to manage just over 27,000 claims. Less than 5% of claims, some 1350, resulted in underpinning.
In 2007, about 30,000 claims were notified, with about 70% repudiated. Out of the 9000 remaining, up to 4% went to underpinning, resulting in a maximum of 360 jobs on offer, nationwide.
Given the industry's lack of appetite for underpinning and the subsequent decrease in contracts, it is no surprise to find specialists broadening their horizons. Many are either joining forces with superstructure repairers to offer a one-stop shop solution, re-training their
teams to offer building repair as well as foundation solutions, or ditching the insurance sector completely and honing in on the construction and basement installation markets.
The Association of Specialist Underpinning Contractors (ASUC plus) represents 80% of UK firms (by turnover) and reports that nearly 14% of its members have virtually withdrawn from the insurance market in the past three to five years.
Looking at the opportunities elsewhere, it is not surprising contractors are diversifying. In the construction sector alone an eye-watering £9.325bn government funding has been allocated to the 2012 London Olympics (possibly more than has been spent in the entire history of subsidence claims), then there is post-2012, the Thames Gateway and public sector regeneration.
Big projects include the Eurostar terminal at St Pancras, the King's Cross redevelopments, port projects at Shellhaven, Felixstowe and Harwich, the East London Line extension and the Victoria Station redevelopment. Will contractors really want to focus on subsidence claims when there are rich pickings elsewhere?
Underpinning specialist Withers Group managing director Rob Withers says: "Over 25 years ago, the number of contractors working for insurers would have topped 50. Nowadays, it's less than 20. Not only are there fewer contractors, but less of their work is for insurers. Five to 10 years ago, over half of a contractor's turnover would have been insurance funded, in some cases now, it's less than 3%.
Five years ago, Withers' business split was 80% subsidence and 20% other, now it's 30% subsidence and 70% basement and new build work. These figures are no doubt reflected in other contractors' order books.
In a bid to ensure all those involved in the handling of subsidence claims have a greater share of voice and an opportunity to keep abreast of latest developments, the Subsidence Forum was formed in 2004. An organisation for all things subsidence-related, its members (representing insurers, loss adjusters, specialist suppliers and contractors) last year voted Withers in as chairman.
It is the first time a contractor has been appointed by what was initially an insurer-led association and allows him an overview of the subsidence sector, latest developments and technologies. Withers says: "The trend is to investigate and monitor, mitigate via tree removal or drain repair, stabilise the building and then monitor. The belief is providing the cause is removed, the property should return to its previous condition and therefore only require an above-ground structural repair."
But he is concerned at the number of reopened subsidence cases because underpinning was not offered as an initial solution: "It's especially frustrating for the homeowner when a contractor has to revisit and work below ground because the above-ground solution was not effective."
Payment issues have increasingly become a bone of contention for contractors and Withers's position within the Forum provides an opportunity to tackle payment delays. But sluggish invoice payments, coupled with booming alternative sectors, are turning contractors away from subsidence claims – potentially exposing the insurance industry to a supply chain shortage, should another surge occur.
With incidents of natural disasters increasing (the insurance industry is already faced with a £3bn bill following last summer's floods) the prospect of excessively hot summers and colder winters (interspersed with the odd deluge), leaves contractors wondering not if, but when the next volume surge will be.
Climate change is considered to be a real and active phenomenon. The Climatic Research Unit at the University of East Anglia reports that in the past 100 years, the average temperature of our planet has increased by up to 0.8˚ and global sea levels have risen by between 100mm and 250mm.
Withers continues: "With less subsidence experts, resources could be severely tested during a surge period and insurers may be hard pressed to find enough contractors to deliver that insurance promise. If there were about 40,000 to 50,000 claims the industry would react as before and cope. But there's one big difference – the 4% of claims that result in underpinning would hit contractors in the 2008 to 2010 period, during construction for the 2012 Olympics.
"Contractors who have a strong relationship with their insurers will stay loyal, but there's no doubt skilled operatives will be in demand.
They'll be sourced from the Midlands downwards, which could leave insurers without national cover."
Although many firms have moved out of the subsidence sector, there are rumours that underpinning may become in vogue again, following criticism from the London Assembly's Environment Committee that says insurers are pressurising councils to remove trees on the "flimsiest of evidence" (Chainsaw Massacre – a review of London's street trees – May 2007).
Withers concludes: "Developments in investigation and monitoring ensure trees are never removed lightly, however, if boroughs are not keen to authorise tree removal, then other solutions will have to be considered. In clay subsoil areas, the only options will be to provide root barriers that require a working space that's at least the height of the tree or underpin."
Will this herald a return to more underpinning? The industry will have to wait and see.