C&L, Cranes & Lifting, Features

Weighing up risk over reward

The crane industry is no different to any industry sector. As a result of the continued COVID crisis, there has been an increase of stress and strain on operations which has lead to more crane accidents.

Crane accidents are on the increase and for a number of reasons. A large proportion stem from operator error and a lack of due diligence from a safety perspective. When pressure is applied to deliver on the terms of a contract, corners are cut resulting in accidents. Dean Bassed, partner in crane specialist insurance broker PNOinsurance, explains more.

Fresh out of university, Bassed began a graduate program at QBE before moving to UAA where he worked as a development manager and then state manager across Victoria and Tasmania. With a wealth of experience in construction and cranes, he joined one of UAA’s leading supportive brokers, PNOinsurance in 2017, becoming a Partner in 2018.

Formed in 1977, PNO has specialised in the construction sector from its beginnings, with the crane industry being a key focus. This largely stemmed from one of the founding directors, Marty Owen, who had strong technical experience in the crane sector, and the relationship between UAA and PNO now dating back over 20 years. PNO has been managing a number of long-term clients in the crane and construction space over this period and in turn have created a reputation as one of the country’s leading insurance brokers in the industry.

“Our customer profile covers everyone, from your one man band right through to some of the largest crane operators in the country,” said Bassed.

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During his three years with PNO and time previously with UAA, Bassed has seen insurers enter but then move out of the crane sector due to poor performance.

“The difficulty with the crane industry is the ‘premium pool’ collected is only so large; obviously it’s not as large as the transport sector, for example, and the severity of claims with cranes is significant, as we know.

“Therefore, if there is a spike in accidents it’s quite feasible for an insurer to burn their fingers with underwriting results that are unprofitable. If an underwriting agency haven’t got a backing insurer with a long-term view to persist in the industry, inevitably we see premium increases to a point they are not competitive with the likes of a UAA, which often results in a decision to withdraw from the market completely.

“We’ve seen insurers from the London market come in for a year or two, come to the realisation they aren’t going to make money in the short-term, and move out again,” said Bassed.

Today, the choice of insurers is getting smaller and smaller, with UAA being one of only two pillars now supporting the crane industry with any real substance in terms of market share. Due to this, in recent times UAA have been growing their already dominant presence in the market, consistently increasing the number of customers they are working with. It is vital for UAA to maintain strong relationships with the brokers and teams that will be working with them, long-term, in the crane industry. UAA are excellent at doing this and we have experienced this first hand at PNO, says Bassed.

We are seeing new industries create more work opportunities for the crane industry such as wind farms, which is great, but with it comes further risk factors for all companies to consider. These factors and pressure to complete jobs on time, increases the likelihood of operator error and on a high risk terrain site such as a wind farm, the fallout in relation to cost and business interruption from an accident are severe.

“Attitude on safety can certainly be drawn back to the culture of a particular business, and it’s really about risk versus reward; their insurance is protecting that client from risk, but it also becomes a conversation about limiting the risk. It’s all about finding the delicate balance between the commercial side of getting the job done correctly and on time, and pushing the boundaries too far from the risk point of view.

“From an insurance perspective, it’s really an educational process with our clients. We go through lots of examples, whether it be dry hire agreements, limits on goods lifted, multi lifts or business interruption where we will have in depth conversations with our clients and run through hypotheticals of how a claim will play out. Having extensive personal experience in this space puts PNO in a great position to provide the protection our clients need.

“With insurance rates going up and insurers looking more closely at how certain operators perform, it may become increasingly difficult to obtain competitively priced insurance (or  insurance at all for poor performers), there really is importance in understanding the intricacies of your insurance policy with a broker that can explain it in a clear way” said Bassed.

“We have long-term clients who continually refer us to other businesses and have achieved further significant growth with more key players in the crane industry moving across to PNO in recent time. Once we begin working with them, clients tend to stick because we have such a stable relationship with insurers,” said Bassed. This is strengthened by the tailored advice PNO provide and their experience in the crane sector.

“We have ongoing conversations with our clients; as their crane fleets increase, their insurance needs may change. Their appetite for risk may increase, business interruption covers may need to be altered or additional covers sought, with each insurance program modified to suit the needs of the individual business,” said Bassed.

Cyber attacks are a topic of conversation Bassed is having with every customer in every industry and is an issue very business owner in Australia needs to be aware of.

“At PNO, we are no different, are just as vulnerable to this problem and have done a mountain of work in our own business to reduce this risk. Some of the key issues we have seen clients experience are ransom, hacking attacks and cyber fraud which can cause massive business interruption and financial loss”, he said.

Toll is a good example of a recent hacking which caused significant business interruption across the country.

“It is certainly a growing area and there is a misconception that because you have data stored in the cloud or you have a solid IT provider it means you are safe. If you have data in the cloud it can be accessed, copied or stolen just as easily as data on a computer or a server”, said Bassed.

Bassed says it’s a part of the insurance which is growing exponentially and is currently relatively competitively priced, but he believes over the coming years we’ll see premiums rise because claims are increasing and hackers are becoming more technologically advanced.

Cyber insurance is in a similar position to that of management liability insurance over ten years ago, where the wider market was only beginning to see the importance of the cover and exposure faced. Now we see management liability as one of the key areas of any insurance program. We have seen several examples of this coverage over the years saving the business of our clients by providing protection during OH&S investigations, employment practices or fidelity matters that can run well into the six figure range. Bassed stresses this is another area where client education is paramount.

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