Covering the risk on a construction site requires serious thought, and the risks are endless. From practical risks such as scaffolding and equipment, to issues around worker competency and training, the challenges facing construction insurers are great.
Statistics from the Health and Safety Executive in 2007 to 2008 show a major injury rate of 302.9 per 100,000 employees, significantly higher than the average rate of 82.9 across all service industries. Yet the industry is perceived as being unresponsive to the issue, particularly at the lower end of the contractor chain.
This year, the equivalent of one worker per week has died on a construction site. General deaths and injuries have fallen recently, but these statistics can be partially attributed to the slow down the industry has faced as the recession blights the sector.
The focus on a long-term effort to reduce accidents on construction sites will be of great interest to insurers, which often find they bear the financial brunt through employer's and public liability claims.
The contractor chain in construction sites is often complex and multifaceted. Working beneath a large national constructor may be a number of sub-contractors, many of which in recent times have employed migrant workers from Eastern Europe and South-east Asia. At the very bottom of this chain, workers can be left unprepared for work, due to language barriers and insufficient training. It is estimated that 3% of construction workers in the UK operate under labour supply companies, or 'gangmasters', as they are often referred to.
Most media attention on gangmasters surrounded the Morecambe Bay tragedy in 2004, where cockle picking migrant workers died under poor working conditions.
But are these gangmasters the villainous, unregulated entities they are often portrayed as? Or do they provide a valuable service? With regard to the role gangmasters have on construction sites, a totally different industry, insurer opinion is divided.
Rita Donaghy, the former head of the Advisory, Conciliation and Arbitration Service, issued a strongly worded 96-page paper in July on construction safety concerns. A notable point was the call for Gangmaster Laws Act (2004) - originally enforced to protect workers following Morecambe Bay - to be extended to the construction industry. If implemented, the law would make it illegal to use the services of gangmasters who do not have a license, and would provide regulation to one of construction's "murkier" areas.
A statement from the paper reads: "The further down the subcontracting chain one goes, the less secure the worker and the less satisfied with the management of health and safety on site. Society appears to accept a more buccaneer approach to work in construction, which if applied to another industry or profession would lead to shock and anger."
The issue is clearly an emotive one and, with lives at stake, there are calls for a sweeping reform on how construction site safety is handled. Ms Donaghy adds in the paper: "We should be putting out the clearest possible signal that there is a floor below which a society should not tolerate exploitative practices. I firmly believe that extending the GLA's remit to construction or making an effective regulation with the same objective would provide that signal."
David Hayhow, director of Lockton real estate and construction, says workers operating with gangmasters are valuable to the industry, though often pose communication problems. "We are seeing a lot of Chinese workers coming on to sites in London. There are issues around language, communication, and the understanding of the procedures in place, which are all increasingly becoming an issue. There are two issues arising from this. First, how the principle contractor on site manages them and also, on what basis people are arriving on these sites.
"A lot of casual business comes from gangmasters. However, if you talk to principle contractors, they seem to have robust policy and procedure for managing foreign labour, and they are stepping up to the plate in that regard."
He says there is a lack of compulsory regulation for gangmasters. "There is a voluntary code, and when you look at the big labour supply companies that have been established for over 20 years, they will be accredited with ISO 9001, ISO 14001, and the Contactors Health and Safety Assessment Scheme, where you can become an accredited contractor. You can be informally regulated by organisations but this is purely voluntary."
Coversure underwriting director Kevin Sinclair is in favour of Ms Donaghy's proposition, though stated the site safety issue was unlikely to be totally solved by the extension of gangmaster laws. "Anything that helps to clear up some of the 'murkier' areas of the construction industry is to be welcomed. Untrained or poorly trained casual workers are clearly not in the interests of any participates in the industry, except the unscrupulous end of the market. Any suggestion that this is yet more red tape for the honest contractor going about their business has to be balanced by asking why they would be concerned by only dealing with someone who could show they were a licensed professional.
"The only problem for us as insurers and brokers is that the uninsured and under-insured will remain below our radar. Those businesses that are ignorant of insurance are unlikely to be interested in collecting licence proof."
Francis Cassera, risk management consultant at Heath Lambert, says the opportunities offered through the construction sector would always give rise to shady activity, regardless of any laws imposed. Although he adds the extension of gangmaster laws would lead to a reduction in accidents caused by improper training and regulation.
"While the law-abiding construction companies already factor in the costs associated with good employment and health and safety management, the unscrupulous, by definition, ignore these cost implications. Essentially, where there is the opportunity for profit, there will always be criminal activity. Regulation of gangmasters in the construction industry would see a lessening of fatalities in this sector, only for them to move to another, less regulated industry."
Many insurers believe that the extension of gangmaster laws is a measure to be welcomed, though would be difficult to implement on smaller sites, which are traditionally less regulated.
Phil Wright, chief engineer at Allianz Engineering, says: "From a health and safety perspective at a lower level, the field is fairly unregulated. Health and safety policies tended to apply to the bigger, long-term contractors, and not to the smaller more casual sites. And the safety net is to ensure only those with the appropriate passports are admitted to the site."
Mr Wright adds there are methods by which the construction industry can improve its safety record, and believes the use of health and safety 'passports' would be a more appropriate measure of addressing site safety on smaller sites. "Health and safety passports are an important issue. There isn't a recommendation in the Donaghy report that covers the health and safety passports. That's an unfortunate omission. It is all about determining that people on a site have health and safety competence. The two issues go hand-in-hand."
Despite concerns expressed in Donaghy's report, Paul Knowles, managing director of the construction and real estate unit at Jardine Lloyd Thompson, says the construction industry is making positive steps in improving health and safety, making it an attractive prospect for insurers, despite the risks surrounding it, and continuing stories of fatalities.
"More insurers have entered the arena over the past 10 years - it is a much bigger environment now. Insurance companies are seeing construction as a good proposition. Part of the hard work being put into health and safety by contractors is attracting insurers."
OTHER SAFETY INITIATIVES
A number of simple safety initiatives have been suggested as ways of improving working conditions on construction sites. Barry Snell, managing director of Orion Scaffolding, tackled the cause head on after one of his workers had been seriously injured on site. After this, Mr Snell joined forces with Dr Martin Caudell of BM Solutions to launch a safety product, Clik-on - a tamper-proof, plastic-fitted device designed to stop unauthorised alteration on a scaffold joint.
However, Mr Snell says his attempts to promote his product in the industry have been hampered by the heavy recession, as the construction sector focuses on cutting costs. "Construction companies are looking at best price, rather than best practice. They keep preaching best practice, but it is about best price and not combating the number of people falling off scaffolding - 50 to 70 people a year are dying and thousands more are injured. For insurance companies, these deaths are also payments, when somebody is injured the payments are long term. The costs are horrendous, £200m to £300m a year are the figures quoted to us."
Robert Olner, account director at Argyll Insurance Services, a firm that has backed the rollout of Clik-on, says the construction industry has addressed safety issues in recent years. "Insurers over the past few years have employment liability specialists and construction specialists, who are going on site, talking to customers."
Recent legislation has also added to the exposure construction firms and their insurers face on a daily basis. The Corporate Manslaughter Act, introduced in April 2008, increased the liability of businesses to death and injury among employees. Insurers agree that the introduction of the act has led to an increased focus on health and safety, though this is not the sole reason construction companies are looking to improve this area.
Mr Knowles states: "It is another part of the path the construction industry has been taking, increasing its focus on health and safety; insurers have followed same path. They have recognised heightened risk in terms of legislation. However, that shouldn't be the driver behind why they are looking to improve health and safety."
Glyn Thompson, an associate solicitor at the regulatory services unit at law firm Weightmans, says the possible introduction of gangmaster laws is not necessarily the answer for addressing site safety on smaller, more casual sites.
"The difficulty with construction is that there is such a swift movement of workers around construction sites. Gangmaster laws are well and good for the big employers that have many employees at the same site, but those are the companies that need gangmaster law the least, as they already have measures in place. Those that have poor health and safety standards and victimise union representation are the small relatively short-life construction sites run by sub-contractors, under the umbrella of a principal. How could the gangmaster law be applied to these contractors, as their employees move around often, especially in times when construction companies and sub-contractors are trying to drive down costs?"
Mr Thompson says the current system of regulation lacks authority: "The system as it is works if everyone complies. The difficulty is people rarely comply, because they know they are not going to be heavily regulated. At certain points last year, the Health and Safety Executive had initiatives to bombard construction sites, with one regional campaign leading to approximately a third of all sites in that region being closed down. If that kind of initiative was a constant threat, and small to medium-sized enterprise construction companies knew that they could face a visit, standards would come up."
He adds: "Intelligent insurance companies and brokers are looking to reduce the costs of policies by giving assurances in relation to health and safety performance. The number of improvement notices, prohibition notices and prosecution notices are becoming more relevant. They will often be asked by insurers to demonstrate their safety arrangements and why they believe it will be robust."
Mr Knowles agrees: "Premiums will be reflected in the improved risk management of the contractors. From a broker perspective, we are also seeing the balance of risk changing. Increasingly, our medium-sized contractors are now starting to look at sharing the risk, taking on an excess. That is the sort of thing that gets insurers interested. Nothing motivates a client more than knowing their own balance sheet is on the line."
Measures of addressing construction site safety are in the interests of insurers, though the impetus currently lies with central bodies to impose legislation, and construction companies to reinforce best practice policies.
Mr Knowles suggests that the implications of insurers ignoring the issue are secondary, and indicates it is imperative contractors take action. "Insurers ignoring the issue will have a marginal impact. If contractors ignore it, then there will be implications. We have to say health and safety is the number one priority."
Clearly, site safety issues are on the radar for insurers. Central regulation of gangmasters and improved safety measures on behalf of contractors are potential ways in which fatalities, injuries, and risks can be combated. Despite safety improvements over the years, for cost-burdened insurers and construction companies with responsibilities, one death will remain one too many.