Evolving Complexity in Engineering Claims

Firedart Claims Team—Shelly-Ann Whittaker, Claims Manager; Tlotlego Teffo, Claims Specialist; and Kami Joas Marima, Claims Specialist shed light on the evolving landscape of engineering claims, the complexities involved, and how they stay ahead in an ever-changing industry.

Engineering claims are becoming increasingly complex, with a range of factors contributing to this trend. One of the key drivers is the construction sector's slow recovery from the COVID-19 pandemic, which has led to financial strain on contractors. This has resulted in a rise in claims, with contractors under pressure lodging claims for any loss, regardless of its significance or the quantum. Disputes have also become more frequent, particularly when coverage gaps exist or settlements are contested.

An added layer of complexity comes from external challenges such as the “construction mafia,” where policies might cover physical damage but fail to cover delays caused by criminal activity. Legal judgments like the Café Chameleon ruling have further broadened interpretations of coverage clauses, making the claims landscape even harder to navigate.

To manage these complexities, insurers must combine technical expertise with dispute resolution skills. Staying informed about the construction industry's pressures helps insurers foresee potential issues before they escalate. Proactive communication with brokers and early intervention are essential in managing expectations and avoiding costly disputes.

Technology is also playing a crucial role in addressing these challenges. Tools like claims modules, robotic process automation, and predictive analytics offer ways to streamline the claims process and improve efficiency. Moreover, remote sensing and damage simulation technology can help insurers assess risks in remote areas, further speeding up claims handling.

As engineering projects grow in complexity and value, collaboration between insurers, brokers, contractors, and other stakeholders will be crucial for managing claims effectively. By embracing technology and fostering partnerships, the industry can address the evolving challenges of engineering risks and ensure smoother claims processes moving forward.

Increasing Complexity of Claims:

• Engineering claims have become more complex due to factors like the slow recovery of the construction sector post-COVID-19.
• Financial pressure on contractors leads to more claims being filed, regardless of quantum or event significance.

Rise in Disputes:

• Disputes are more frequent, particularly around claims that may not be fully covered or where settlements are contested.
• Broader interpretations of coverage clauses (e.g., Café Chameleon judgment) have created more legal challenges.

Challenges from External Factors:

• External factors like the “construction mafia” and financial strain on contractors complicate claims.
• Supply chain disruptions and inflation also make reinstatement costs unpredictable, adding to the complexity.

Importance of Technical Expertise:

• Claims teams must have a mix of technical know-how and dispute resolution skills.
• Early intervention with brokers and transparent communication help manage expectations and avoid disputes.

The Role of Technology:

• Technology, such as claims modules and predictive analytics, can help streamline the claims process.
• Remote sensing and damage simulation tools assist in assessing risks and claims in remote locations.

Future Trends:

• Collaboration between insurers, brokers, contractors, and other stakeholders will be key to managing complex claims.
• Tailor-made claims protocols and a proactive approach will become more critical as engineering projects grow in complexity.