As stricter building regulations for new buildings are set to come in force, insurers could see lower property damage costs and pay outs. However, Simon Ford, chairman of the British Damage Management Association, asks if this could be a challenge to emerging sustainable and flood resilient materials?
The current status of building regulations and plans to make stricter implementations are consistently documented in construction and insurance news. Furthermore, when a major property disaster occurs it occupies the national news too. This highlights the fact that the change of building regulations is still often the result of reacting to an event, rather than an active engagement to support the risk management of building health and safety.
The changes of building regulations significantly affect the wider insurance industry. With different building regulations in regards to materials and resilient measures; risk analysis is affected, along with subsequent policy premiums. The value of cash settlements vs building restoration costs are affected. Supply chain relationships can also see a disruption with some suppliers needing to make changes to adapt.
So, when it comes to the work of damage management companies and the wider insurance industry, what are the opportunities posed by stricter building regulations?
It is looking more likely that stricter building regulations in relation to material performance and safety are to be implemented in the near future for new buildings.This is a positive movement as currently the focus is mainly on the stability of a building following a fire incident, for example, yet better material performance will aim to enhance building protection and limit damage. A lot of work has been put into creating materials in line with existing building regulations, and with scrutiny on making stricter changes, there may be a longer delay in seeing more sustainable and flood resilient measures being implemented.
With improving building safety, comes the need for more non-combustible materials, which has long been top of the headlines since the tragedy of Grenfell Tower. The specifications of exterior building materials such as cladding and timber are being even more closely examined and the push for combustible materials to be replaced on existing buildings is prominent.
This presents many opportunities for the betterment of materials on buildings, which is positive for the insurance market. Buildings can then be made more resilient to widespread damage, which works in line with the aims of the wider insurance industry to advocate better solutions and lower risks for consumers and businesses.
There has been increased discussion on the mandatory installations of sprinklers in commercial and multi-storey residential buildings. With better resilience against fires and damage limitation, this would be a ground-breaking change for the wider insurance industry, from underwriting right through to claims processes. This could even prompt more of a focus on fire resilience, which has felt less achievable than the drive of flood resilience. In the future we may well see more equipment developed for remote fire damage recognition, paving the way for quicker reactions from insurers and loss adjusters, and therefore damage management companies. Forensic investigators may also be able to establish the causes of fires more simply.
Zurich disappointed in new #discountrate. David Nichols, Ch Claims Officer: "The failure to change the discount rate to a balanced level will only serve to increase the cost and, therefore, affordability of certain types of insurance - especially for higher risk customers." pic.twitter.com/ac1CfBzfxX— Zurich Insurance UK (@ZurichInsUK) July 15, 2019
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