How the shortage of skilled workers affects professional indemnity insurance
Fluctuation increases error rate
Most professional indemnity insurance policies are currently calculated based on turnover, meaning the higher the turnover, the higher the professional indemnity insurance premium. This extends to employees and specialists, as they are essentially responsible for whether turnover is higher or lower.
The shortage of skilled workers has led to a kind of “battle” for the best employees for years, and many employees are hotly courted and can often change jobs – usually under significantly better conditions.
Where there is high turnover, a proper bond between employee and employer is usually lacking, which increases the likelihood of errors in day-to-day operations. Furthermore, it usually takes time and costs money to train new employees on current projects and integrate them into the general workflow. A specialist is usually assigned to this onboarding process, which then becomes unavailable elsewhere. Given the multitude of tasks and greater responsibilities, minor errors creep in more and more frequently. Furthermore, the office management can no longer monitor, review, and subsequently approve every step with a close eye.
The person is gone, the damage is still there…
However, the biggest problem we see in our daily work with engineering firms is subsequent damage claims. Professional liability insurance is based on the breach theory – meaning that the damages or respective breaches usually occurred several years ago, but a specific claim has only now become apparent. This is where the most work comes into play for the managing directors responsible, because more often than not, the people responsible at the time are no longer with the company. For example, the management or owner must familiarize themselves with the old planning/construction files and attempt to identify the potential error from the documents, often providing detailed comments in court as part of a damages claim process.
In the end, the management is liable
What is often surprising for many engineers is that the Insurance Contract Act also applies here through the individual professional indemnity contract, whereby every policyholder is obliged to report a claim immediately and properly (“mandatorily”) to the responsible professional indemnity insurer and to explain the allegations of the opposing party in the claim form.
This process involves a considerable amount of time and complex detailed work!!!
And this is precisely what is currently leading to overtime and night shifts for many managers in office practice; because ultimately, they are the ones who bear the ultimate responsibility!
Our “Learning”
The infamous fruit basket and other supposedly well-intentioned employee incentives are currently on everyone’s lips.
This is a good start, but there is much more to retaining and engaging employees at the moment.
Good teamwork and respectful interaction are more important than ever.
If you’re a manager with responsibility: Reduce the risk of turnover and save yourself tedious night shifts! Invest in qualified employee retention! After all, it’s the employees who keep the company running—or aren’t they?! And there’s no end in sight to the skills shortage.
JAN-ERIC REIß
Insurance Broker of the Engineers GmbH
The author
Jan-Eric has been working in the insurance industry since 2011 and exclusively in construction insurance since 2014, focusing on professional liability insurance for architects and engineers. After successfully completing his degree in insurance and finance in 2014, he built up a solid knowledge of professional liability insurance through self-study and with the support of two major insurers.
From 2016 to 2018, he gained a foundation in business administration as part of his studies to become a specialist in insurance and finance. He then studied to become a liability underwriter (DVA) from 2019 to 2020, deepening his knowledge of the construction industry. Since July 1, 2023, Jan-Eric has been working in the field and office for Northern Germany at the Lübeck-based insurance broker of engineers (VMI). More information is available at: www.vm-ingenieure.de
