[Check Against Delivery]
Keynote Address by James Dalton to the FPA Fire Sector Summit: The Fire Insurance Landscape for 2019 and Beyond
31 October 2018
Introduction
Good morning. And thank you for that introduction.
Over many years, the public policy environment in relation to fire safety has been one of the areas where successive Governments have seen opportunities to strip out “red tape” and to de-regulate.
Like many of the fire professionals in the room this morning, the insurance industry has long been warning that a de-regulatory approach posed serious risks to building safety and to peoples’ lives.
It took the deaths of more than 70 people in a high-rise tower in West London to change all that.
The horrific tragedy at Grenfell was, to a certain extent, both predictable and preventable.
The interim report of Dame Judith Hackitt’s wide-ranging review of Building Regulations described the system as “not fit for purpose”.
For the first time in recent history, we have a meaningful opportunity to improve the protection of people and property from fire.
That opportunity cannot be missed.
We owe it, not just to those who were lost in June last year, but also to the 6 people who were lost in the Lakanal House fire in 2009, that their deaths were not in vain.
And we must ensure that this time around, when politicians say “we cannot allow such a tragedy to happen again”, that their rhetoric is turned into action.
So the question I want to pose to today is whether the public policy response is comprehensive or swift enough and to consider how that translates into the fire insurance landscape for 2019.
But first, some context in terms of current fire trends.
Current fire trends
According to the Home Office, the Fire and Rescue Service attended 564,800 incidents in 2017/18, with over 167,000 of those being fires.
There was a 3% increase in the number of fires compared with the previous year, albeit that, when seen in a historical context, there were 43% fewer fires than there were 10 years ago.
Until the tragedy at Grenfell, the number of fire related fatalities had been on a downward trend since 1981/82.
Sadly, it is this success in reducing fire fatalities that led successive Governments to take their eye off the ball……
…….to ignore calls from fire safety and building professionals that the de-regulation pendulum had swung too far, and…..
…….to discount evidence from the insurance industry that the cost of fire-related insurance claims was increasing, even though the number of claims was falling.
Indeed, over the ten years between 2007 and 2017 the number of fire-related claims reduced from 100,000 to just over half that number – around 51,000 – claims in 2017.
But the average cost of fire claims has doubled over the last ten years from £11,000 per claim in 2007 to £25,000 in 2017, even when adjusted for inflation.
And for insurers, it is that context which rang alarm bells and led to the release of the ABI’s report “Tackling Fire: A Call for Action” in 2009.
Let’s just say, it wasn’t a best seller.
Like many of you, we remained concerned at what we were seeing.
The evidence showed that we were seeing fewer fires…..
but the fires we were seeing were more intense, more costly, and more likely to lead to the total loss of a structure.
We continued to make the case that the public policy settings for fire safety were not right.
Many of you joined us in those calls for action by providing technical evidence and support. It took Grenfell for policymakers to sit up and take note.
The response of policymakers
But sit up and take note, they did.
There has been an understandable focus on the issues associated with combustible cladding systems – on which I will say a bit more later.
But it was the building control system overall that allowed combustible ACM cladding to be manufactured, certified, incorporated into designs by architects, approved for use by authorities and installed by builders.
So to focus only on the cladding itself at the expense of a forensic examination of the wider building control system would have represented a significant missed opportunity.
Dame Judith’s report confirmed our view that Grenfell represented a systemic failure of the entire building control system.
And we have spent significant time with Ministers and officials from the Ministry of Housing, Communities and Local Government (MHCLG) and other stakeholders to make the case for meaningful reform to the whole system.
It is important to be clear that the changes we are advocating are directed towards new-build properties, given that the short-term costs of construction should not be at the expense of building safety over the long-term.
For the existing building stock, owners need to understand the construction of their property and appropriately manage any risks posed.
That may involve the removal of cladding or alterations to the structure. But that will be a decision for the building owner to make who will, I am sure, now be cognisant of the legal risks they face.
So against that background, there are four key things the insurance industry wants to see emerge from the reviews underway, which I’d like to examine in turn.
Review of the Building Regulations
Firstly, the review of building regulations and Approved Document B.
In our “Call for Action” in 2009, the ABI called for a comprehensive review of building regulations to ensure robust procedures are in place that enable a competitive property insurance market to continue to flourish.
The reviews and inquiries underway, should improve fire safety in our buildings.
And if the buildings of the future pose a lower risk, then, all other things being equal, their insurance premiums should be lower as well.
We welcome MHCLG’s announcement that there will be a full review into Approved Document B in “the Autumn”.
But on an issue as important as this, much greater urgency is needed given that, 16 months after Grenfell, the review hasn’t even started yet.
The announcement of an impending review is not action.
And we all know that the Government’s seasonal timeframes for delivery bear no resemblance to what the weather is actually doing…..
…….so it could easily be Christmas before we see progress starting to be made.
We urge the Government to announce further details on the review of Approved Document B as a matter of urgency, especially given the technical complexity of the issues it is likely to involve.
The use of combustible cladding
The second area we are focussed on is the use of combustible cladding.
For anyone who has watched footage of the Grenfell tragedy, the speed of the fire’s spread as the tower’s cladding ignited, is one of the most frightening images.
One feature of the broken building control system is the amount of combustible material that has been permitted by the current regulations.
Better control of the use of combustible cladding material on high rise and high-risk buildings has long been a key ask of the ABI.
So we were pleased to see the Government take action to ban the use of combustible cladding on buildings containing flats, residential schools, carehomes, hospitals and student accommodation – all over 18m.
But as with so many things in life, the devil is in the detail. Although we are still waiting for the detail, the more our team got into the information that has been released to date, the more questions they started asking:
- Why is the ban limited to buildings with a height greater than 18m?
I accept that 18m is the height after which fire is more challenging for the Fire and Rescue Service to combat….
…..but I’m struggling to understand why someone could, according to these proposals, build a care home or student accommodation in the future that is slightly lower than 18m in height and then cover it in combustible material.
Put simply, combustible material does not belong on high-risk buildings housing the most vulnerable in society.
- Why is the ban limited to flats, carehomes, hospitals and student accommodation?
It doesn’t make sense that someone could live in a high-rise residential building to which the ban applied but commute to work every day in an office block which is covered in combustible material.
Nor for a child to go from their parents flat to which the ban applied to attend school in a building that is wrapped in combustible material.
Of course, I recognise the Government’s view that there is a higher risk where people are sleeping, ……..
and there are more stringent rules on evacuation for commercial properties, …….
but why are hotels not covered by the ban on the use of combustible material?
We need to step back and consider what ‘combustible’ should mean and be radical in our thinking to effectively protect all buildings and people at risk.
Our concerns are clearly reflected in a letter from Steve Reed MP and twenty other MPs to the Secretary of State arguing that the ban on combustible material does not go far enough.
The ABI will continue to make the argument that the ban on combustible materials in the limited types of buildings that have been set out to date, runs the risk of unnecessarily limiting the public safety benefits that the welcome intervention from the Government is designed to achieve.
The testing process for cladding
The third area that remains a key area of focus for the insurance industry in terms of the on-going reviews relates to much needed improvements in relation to the current testing regime for materials used on buildings.
Earlier this year, the ABI commissioned research from the Fire Protection Association which highlighted significant concerns with the BS8414 testing regime.
The results of the research clearly demonstrated that the current testing processes for cladding do not replicate real-world conditions……
and that the fire performance of materials can be significantly changed when exposed to everyday settings.
Our research highlighted that the current test does not consider:
- the 20% of plastic within buildings which increases the size of the flames,
- testing that doesn’t take account of vents and ducts within cladding installations,
- and the performance of cavity barriers in these scenarios.
This ‘fresh-eyes’, non-product-specific study, demonstrated potentially major shortcomings in the BS8414 test regime.
In short, the testing regime failed the test.
The ban on combustible cladding may mean that BS8414 isn’t needed on certain products, but it will still be required on buildings outside the scope of that ban.
It is fair to say that our very public calls for a meaningful change to the testing system have ruffled a few feathers in the standards community.
I make no apologies for that.
When it comes to fire safety, we need a testing framework that is closely aligned to the realities of construction in the built environment, not one that is divorced from that reality.
We are pleased to see that the BSI has taken action to review the BS8414 framework and we will be carefully scrutinising the results of this work in due course.
Considering all high-risk properties and sprinklers
The final area that remains a key, on-going focus of the insurance industry in the context of the overall response to the Grenfell tragedy, is to seek to ensure that policymakers achieve a better fire safety system for all buildings.
Warehouses remain a particular concern for insurers.
Given the changes in consumer purchasing demands and the rise in online shopping in recent years…..
…….retailers operating sophisticated logistical operations require large, un-compartmentalised spaces to house densely packed goods, to the point where some warehouses now measure over 50,000 square metres.
We need to appreciate that the type of buildings that we are constructing, and the materials we are using to construct them, are changing.
And it is essential that building regulations and fire safety keep pace with that change.
Warehouses are a real and present fire hazard with thousands of people working in them who need to be protected, along with those who carry out search and rescue in these huge spaces in the event of a fire.
Every year, there are around 620 warehouse fires in England and Wales and around 95% of these warehouses do not have sprinkler fire suppression systems installed.
So, the other area that we cannot lose sight of is the importance of increasing the use of effective sprinklers.
And the benefits of sprinkler installation are clear: losses from fires in buildings protected with sprinklers are estimated to be a tenth of those in buildings without sprinkler protection.
Their use means consequential losses and inconvenience can drastically reduce. This helps businesses affected by fire to get back up and running more quickly.
I have spoken publicly before about the scandalous state of regulations in England that does not require the mandatory installation of sprinklers in newly built buildings that house the most vulnerable in society.
The bigger scandal is that in all of the post-Grenfell reviews to date, there has been nothing done to consider the mandatory use of sprinklers.
We also commissioned technical research from the FPA on sprinklers.
The results of this research are being released by the ABI today and are available on our website.
The technical note seeks to update current industry best practice and knowledge to ensure that future sprinkler systems resiliently meet their design objective, specifically if installed in residential environments.
It focuses on ensuring that the people and products across the supply chain are qualified and certified to install sprinkler systems; ………
and that systems do not operate falsely, resulting in an undermining of their reputation and, therefore, their use.
Professional Indemnity Insurance
Finally, it’s worth me saying a word about professional indemnity insurance as some in the construction sector have raised increasing premiums as an issue they are currently experiencing in today’s market.
The construction industry as a whole has a long history of major PII claims, meaning it is a sector that often presents unattractive risks to PI insurers.
These were issues before Grenfell, but the construction industry is now operating in a regulatory environment that has been found by Dame Judith to be unfit for purpose.
Competition and capacity still exist in the professional indemnity market and reinsurance is available.
But the potential for significant PI claims in the sector in a post-Grenfell, post-Carillion environment is clear.
Well run construction firms with:
- accurate record-keeping;
- good knowledge of the materials they use;
- robust internal procedures and protocols; and
- a risk management process for current and future projects
will be more attractive to professional indemnity insurers.
Make no mistake about it: Many professional indemnity insurers in the construction sector are asking more questions of prospective clients in relation to potential exposures.
Insurers are likely to be doing more diligent risk assessments and so customers may well find the process of obtaining PII a lengthier one, ……
and one that is possibly more expensive.
Conclusion
In conclusion, as part of the ABI’s work on fire policy we have been supporting the range of Government reviews that have taken place since the tragedy at Grenfell.
The increased attention from decision makers and the media on the issues of fire safety are a critical opportunity to look at the building control system in its totality.
Time and again, we have witnessed what happens if the Government takes a piecemeal approach to reform, rather than thinking holistically.
We need to maintain a focus on achieving meaningful change and to continue to shine a light on Government recommendations if they do not go far enough.
I can assure you that the insurance industry will continue to provide that scrutiny.
We will continue to challenge Government on the pace of action.
We need the consultation on Approved Document B immediately.
The Government must provide more detail on the ban on combustible material and seriously reflect on their failure to incorporate other high-risk buildings.
Meaningful change must be made to the BS8414 testing regime to ensure that it is fully representative of real-world scenarios.
And we must review the mandatory use of sprinklers in complex buildings, such as large warehouses and those which house the most vulnerable in society.
The nightmare scenario for me is that we repeat the mistakes made in 2009 in the aftermath of the Lakanal House fire and don’t make the changes we need to see, in order to ensure the fire safety of buildings improve.
It is right and proper that the review processes underway engage the experts, consider the evidence and assess the options.
That takes time.
But the reforms that are needed, and that I have set out today must be the end result of this work.
And it is incumbent on all of us in the fire safety and insurance communities to ensure that these much-needed changes become a reality.
Thank you.