The recession of 2008 was tough on the construction industry. Thousands of construction workers left the industry for greener pastures, and many companies were forced out of the business altogether. Luckily, the industry has come back strong, and many would even say it’s booming today. And there seems to be a renewed enthusiasm in the industry for improving efficiency and focusing on risk management strategies that offer the most bang for the buck.
For owners and builders who operate their businesses efficiently and manage their risks effectively, that means lower construction insurance premiums, broader coverage, and higher limits – all welcome benefits in a more budget-conscious post-recession environment.
But some trends in the construction industry are negatively affecting your New York construction insurance rates and creating new coverage challenges.
Although the industry is bouncing back, it’s also evolving, and it’s not all good news. Here are a few of the major trends that are creating challenges for construction insurance buyers:
- Labor shortages. Many construction workers left the industry when the recession hit, and that left contractors scrambling to meet labor demands. According to the Associated General Contractors of America (AGC), construction companies across the U.S. continue to face challenges finding skilled workers despite growing demand. There’s also a shortage of candidates for salaried positions such as project managers and engineers. These labor shortages can mean lost revenue, loss of ability to bid on new projects, project delays, and other negative consequences. These shortages are also directly impacting workers’ compensation claims and premiums, since there are fewer workers carrying more of the workload, and many newer workers are less skilled or need more training.
- Growing cyber risks. This threat continues to explode, and according to Symantec’s 2016 Internet Security Threat Report, companies of every size are at risk. If your construction company is connected to the Internet and/or you use mobile devices, you face the threat of a cyber-attack. And the costs associated with these attacks can be financially crippling for a construction company that’s not adequately protected.
- Heightened claim environment. Accidents happen on construction sites every day, and claims against construction companies are inevitable. But many companies still don’t manage these liability risks effectively. For example, many construction companies don’t have adequate knowledge of their claims history, specifically the claim trends that adversely affect their loss experience and total cost of risk.
- Increasing environmental liabilities. Construction companies are increasingly held liable for environmental accidents, and between more aggressive enforcement of environmental laws and rising health and natural resource concerns, frequency and severity of claims are on the rise. As environmental legislation and case law evolve, construction companies are finding it more difficult to stay ahead of the game, requiring an evolving and comprehensive environmental risk management strategy.
- Costly equipment, costly exposures. Modern construction machinery has sophisticated capabilities designed to improve efficiency, productivity, and safety. But along with those new capabilities come added costs and new risk exposures. One of the biggest exposures contractors face is accidents that damage expensive equipment and delay projects.
While business is booming for the construction industry, the cost to insure your operations is on the rise and coverage issues are getting more complex. That means now more than ever, you need a robust risk management strategy to tackle these evolving risks head on and keep your costs down.