By: Brett Findlay, OneGroup
Over the course of the past year, it is fair to say that businesses in all industries have faced new challenges. The construction industry and the corresponding insurance marketplace have been no exception. In the Spring of 2020, reports suggested that commercial insurance buyers specifically in the United States, would face sizable pricing increases in 2020 and 2021. These reports were published prior to the Coronavirus pandemic. At that time, the potential increases were predicted for most lines of insurance. Those indications were the first of a hardening market. As a contractor in New York State, the insurance marketplace is limited enough to begin with, let alone at an affordable price. The question(s) become, what has changed and how do I prepare as a buyer? Because if you do not prepare, you may be on the receiving end of negative renewal experiences.
A hard insurance market, by definition, is characterized by an increased demand for insurance coverage coupled with a reduced supply. Typically, underwriting guidelines become more stringent, policies issued by carriers dwindle, premiums are high, and insurers are less willing to negotiate terms. This was happening prior to the pandemic, and for certain lines of insurance the pandemic has only seemed to exacerbate the situation. We are now in what is considered to be the first hardening market to take hold since the turn of the century. Rates have not reached that point yet, and it is too early to tell if they will continue on that trend.
As a business owner there are some items that are paramount to have a handle on in order to weather the cycle as effectively as possible. Having an experienced broker and a strong relationship with them is of the utmost importance. That broker should be able to coach you on the development, implementation and/or fine tuning of your risk management & safety program, coverage adequacy, carrier relations and claims history. Having a handle on these items, and how you represent them to the insurance carrier(s) is key to maintaining or improving your current program and budgeting for the costs associated with it. So, what has changed with your program, and how do you prepare for it?
Any given broker may be the best fit for your company, but, if the agent representing your account cannot properly handle it then your company is the one that ultimately pays for it. That is why it is critical to have an experienced agent. The agent should be diligent and proactive in learning about your business. They will need that firm understanding of your industry, and how your business functions within it, to properly paint the best picture of your organization while discussing it competently with the underwriter of any given carrier. The picture being painted needs to include certain key points, as previously mentioned those points include your risk management and safety procedures, claims history and coverage needs. Being able to discuss each in depth and coherently to an underwriter will put them on the path to providing the program that you need and being able to do so will provide you with the best program and rates available to your industry class.
It is equally important to have a broker that understands the marketplace and which carriers to involve in the underwriting of your account. The ability of that broker to forecast the costs and insurance availability with the proper coverage is key. Long story short, you need someone who knows construction, and knows the carriers and underwriters that write insurance for construction operations.
Typically, a hard market is not a fun process to go through. With that being said, you have the ability to proactively position your business to handle the situation. Talk to your agent, prepare yourself for the unexpected and the possibility of having to market your insurance, get in front of the curve to limit any potential program failures. As you have heard me say before, contractors in todays’ economic landscape, must be sharper than ever to increase or even maintain profit margins. Preparing yourself for a hard market and forecasting any potential dramatic increases to soft costs, will put you in a better position to control your margins.
At OneGroup, we are a team of specialists, dedicated to risk management and construction industry specific insurance issues. We hope to serve as a resource to your organization for all your construction specific questions and concerns. OneGroup takes great pride in being at the forefront of industry trends and assisting others where we can. You can learn more about us at: www.OneGroup.com.