On 19 July, Housing Forum members gathered at a webinar to learn more about guarantees, and how insurance-backed guarantees (IBGs) are able to provide greater clarity to the market.
After an introduction by Housing Forum Chief Executive Shelagh Grant, Shaun Lotay, Technical Director at Langley, provided guidance on guarantees for building systems, and demystified guarantees.
Langley is an experienced provider of roofing systems and waterproofing systems, including eco-solutions and green roofs. Langley also advises on all elements of roofing, and is one of thirteen ‘Building a safer future’ champions, providing expert-led solutions in the marketplace.
What is a guarantee, and what are the different types of guarantees?
A guarantee is a promise that something will be done and will be made by companies to give consumers confidence to purchase their products.
Guarantees are not regulated, so businesses can in theory promise whatever they like. However, they are enforceable, as they are contracts.
Factors such as a company’s history, reputation, a consumer’s relationship with a company, or the amount of detail in the terms and conditions can inform consumers on how much to trust the guarantee.
Terminology for guarantees is often interchangeable, common terms likely to be encountered include warranty, product or material only, labour or workmanship, design or specification.
What is insurance, how does it relate to guarantees?
Insurance is a financial relationship between two parties, in which the insurer provides money in the case of an unforeseeable event.
A company cannot provide any regulated insurance services unless they are registered and regulated to do so. This includes giving suitability advice, fulfilling or taking premiums. Regulated insurance companies must pay for a valid claim, regardless of their financial position. Insurers are regulated by the Financial Conduct Authority in terms of how they behave. Their soundness is regulated by the Prudential Regulatory Authority, part of the Bank of England.
What is an IBG, how can it be identified?
An insurance-backed guarantee (IBG) is a guarantee backed by a project-specific insurance policy for a fixed period. This is different than, for instance, Product Liability and Professional Indemnity Insurance, as they are not insurance policies that back the specific project guarantee.
An IBG kicks in at the point when the guarantor goes out of business, to ensure that protection goes beyond the existence of the company itself.
An IBG’s primary purpose is to protect the guarantee holder if the company stops trading. Without an IBG, a guarantee becomes worthless if the guarantor goes out of business. Typically, IBGs primarily cover material, design and workmanship.
There is confusion in the market, as guarantees are still unregulated, and can even be refered to as IBGs even if this is not the case.
Changes are coming from the Code for Construction Product Information, regarding marketing claims integrity. This has created a definition for IBGs, confirming it as a project-specific insurance policies.
It is not a legal requirement to provide terms and conditions on IBGs, but where these are included they should give details of what is covered and what obligations the guarantor must give for the IBG to be valid. Technical jargon, however, can still reduce clarity and create more questions.
What is the significance of a crystal mark?
A crystal mark on, for instance, terms and conditions, is a seal of approval for specific documents from the Plain English Campaign. The Campaign examines documents and applies certain conditions such as sentence length, clarity of language and use of active verbs, to certify documents. These are useful ways to ensure that IBGs have clear wording.
Langley provides an IBG on their products, an independently insurance-backed genuine single-point Guarantee. Documents have a crystal mark, and cover defects arising from design failure, poor workmanship, a fault in the system or faulty materials. This IBG is particularly strong, lasting up to 30 years, secured by Langley, and extended to all Langley-approved contractors. This remains in place even if the approved contractor and Langley cease trading.
After presentations, Shaun answered questions from the audience:
How will IBGs be impacted by flat roof technologies?
This will depend on the provider, the majority of manufacturers only offer cover on materials. As we move into more sustainable practices, there is inclusion in the guarantee for the expertise provided.
What is the requirement to keep maintenance records, and can contractors reject a claim without them?
It is worth checking what is covered in the terms and conditions. Installation instructions set the standard of what should be achieved, if this is deviated from it comprises poor workmanship. Maintenance records should not preclude at least some part of the guarantee. However, if a lack of maintenance led to a specific defect there would be a route for the manufacturer to get out of their guarantee.
How many years does the warranty last?
It depends on the terms and conditions, these can vary from a year to 60 years. Langley gives 20 – 30 years as an IBG.
What are the limitations of the materials product guarantee over design, supply and installation?
Aside from IBGs, all of the terminologies are interchangeable, e.g. guarantee vs warranty. A product guarantee vs design and installation depends on the terms and conditions, usually product guarantees are only covered against manufacturing defects.
Thank you to Shaun for presenting, and to the audience who contributed to the discussion.
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