The British insurance industry has seen a phenomenal rise in insured fire losses for commercial buildings over the past ten years. There has been an amazing 50% rise in the cost of fire-losses between 2002 and 2008 with the annual cost standing at a staggering £1.3bn per year.
What did the insurance companies do to combat this? Many would say ‘Not a lot!’ Quality fire-protection and consultancy businesses prepared for insurance action expecting them to adopt a similar stance to that of burglary cover. Professional companies trained their staff, adopted quality procedures and entered third-party certification schemes such as BAFE. All the indications were that insurers wouldn’t continue to stand huge losses and would, like the intruder model, insist on third-party certified companies and even demand minimum specifications or categories of protection.
No such requirements emerged and when times got hard for everyone, including insurers, then requirements seemed to be relaxed and specifications became softer. This short-term scramble to retain custom has proved a long -term loss with record claims for fire damage.
While BAFE-approved suppliers were jumping through hoops ensuring standards remain at their highest, one-man-band sparkies were undercutting on price and quality and insurers were saying ‘Okay we’ll accept that.’
There are, of course, many factors that have contributed to the rise such as: a distinct change in methods of construction ( a more relaxed approach to building regulations has seen many buildings constructed with much larger compartments), ‘The Green Lobby’ has successfully pushed for better insulated buildings (which means more combustible materials being used).
The legislative changes introduced in October 2006 also may have, inadvertently, had an adverse effect; the move to a risk-based assessment where business owners became responsible and a move away from prescriptive enforcement has initially led to a situation where many business simply do not comply. [At the FireEx North event last year Richard Stott, enforcement policy manager at Lancashire Fire and Rescue Service, stated that up to 60% of local SMEs were not even aware of the existence of the Fire Safety Order].
However things look set to change. In an article in this month’s ‘Fire Risk Management’ Roy Watkins (Technical and commercial insurance director – AXA Insurance) describes how the fire and rescue service and insurers are beginning a model of sharing data and even shared inspections. In the article he says “We need to make progress through a dynamic partnership involving fire and rescue services, insurers, end users and the trade. It is in all our interests.”
Amen to that!