Important Changes to Guarantees and Insurance
The damp proofing and timber preservation industry was, in many respects, at the forefront of consumer protection and can be credited for being among the first groups of specialists within the construction sector to introduce long term guarantees protected by insurance. In fact it was a group of far-sighted preservation contractors that started a scheme to protect guarantees. This became Guarantee Protection Insurance Ltd (GPI) and is now the foremost provider of specialist insurance in the UK, backing tens of thousands of company guarantees across the construction industry each year.
It therefore came as a shock when, in the latter part of 2014, GPI informed us that insurance cover on twenty year guarantees would soon be a thing of the past. We discovered that the change in cover was the result of far reaching changes sweeping through the insurance industry. Solvency II, is an EU Directive implemented by the Financial Services Authority (FSA) and setting requirements for the amount of capital that EU insurance companies must hold to reduce the risk of insolvency. The result of the regulation is that no UK insurer is likely to want to provide single premium, long duration insurances in the future.
Contractors have been concerned that the loss of 20 year insurance may be seen by some as a reflection on the reliability of the work they do but, in reality, the changes are not as a result of a poor insurance claims history or problems with existing work, but as a direct result of the newly introduced insurance regulations.
Consumers want to employ tradespeople that are trustworthy, professional, reliable, courteous and competitive. A clear offering from a trustworthy firm that has the ability to do good work and back it with UK based insurance, gives a great deal of comfort but this should be secondary to knowledge that the firm being employed will do good work and is likely to be around in the unlikely event that problems persist. The length of the firm’s guarantee should not be the trigger to instructing a contractor. Would you trust a firm offering 60 year guarantees?
From a technical perspective we know that if a damp control, timber preservation or structural waterproofing job is undertaken poorly, defects will become apparent quickly – usually within two or three years. Guarantee claims that come in after ten years are often not caused by problems with the original job but are the result of another defect. This is a situation that can sometimes lead to distrust and conflict between company and client.
The question remains, does the length of the guarantee actually matter if you are confident that the survey was accurate, the work undertaken excellent and the firm is more likely to be around if the you need them in the future? We believe it does but we also believe that the term of the guarantee must be reasonable and something that is insurable and can be relied upon.
The PCA would like to think that consumers regard any guarantee issued by one of our members as utterly trustworthy. All too often we hear the words “not worth the paper it’s written on” as we explain to a consumer with a thirty year company guarantee, that the owner of a firm retired ten year ago and the firm no longer exists.
It seems logical that if firms were to issue guarantees for a realistic period then they are more likely to be around to deal with future claims. One of the reasons that well established and otherwise profitable firms don’t find buyers when the directors retire, is the length of guarantees attached to companies. Making this potential cost easier to quantify will make existing businesses more attractive and keep them trading. It follows that if preservation businesses are saleable, guarantees will be retained and consumers will be better protected.
We steadfastly believe that Property Care Association members providing ten year guarantees that can be backed by solid UK based FCA regulated insurance, provides reliance, stability and the best long term protection to consumers.