2021 Builders’ Risk and Construction Outlook
The cost of materials is skyrocketing while contractors and those in the construction and building industries face increased costs. Demand is high for builders thanks to the pandemic’s stay-at-home order and the essential status most builders received during the lockdown. With a busy year ahead, it can be easy to take your eye off the potential for increased risk with heightened business and scope of work.
Insurance rates spiked during the pandemic. The elevation in loss claims from the many businesses who were negatively impacted by caused insurance rates that have been flat or close to flat for close to a decade to increase rapidly. Almost every business insurance renewal is seeing increases in insurance costs.
This chart from Construction Executive shows projections of increases by lines of coverage and is meant as a reference since each insured party will have its own risk and coverage limitations.
Skilled Labor Shortages
Shortages persist throughout the construction and building industries. When coupled with the increase in material costs and the need to pay more for labor in order to get any labor at all, contractors may feel some pressure. The balance sheets of contractors who received PPP funds have yet to find resolution on forgiveness of those debts can drive up their risk profiles causing carriers to increase rates or even deny renewals.
Some Insurance Markets Remain Steady
Worker’s Compensation is holding steady with estimates of -5% – +5%. The possible increase, however, will happen when employers see their rates go up to offset COVID-related layoffs and furloughs as yet unaccounted for in the above numbers. California is especially affected in this regard and in terms of employment practices liability coverage.
Cyber Liability Coverage
No longer the purview of only tech companies, every business will need cyber liability coverage. Online billing, work orders, web-based CRMs, and other data collection methods are the way of the future (and the present). Construction companies that do not invest in cyber coverage leave themselves open to ransomware and the potential of having to shell out large sums of money to retrieve their data from hackers. It is estimated that cybercrime is committed every 11 seconds.
For the first time in decades, the commercial insurance industry is in a hard market cycle. With increasing rates and more stringent criteria for everything from umbrella policies to surety bonds, the time to price-shop coverage is long since passed.
As you look at your coverage, think of the potential for shock losses, evaluate your tolerance for risk, review your industry’s compliance guidelines, and take the time to look at your policies in detail. As experts, we at Competitive Edge can tell you where you are vulnerable and what the risk might cost you. From there, it is your decision to accept the risk or mitigate it with coverage.