By: Brett Findlay, Senior Vice President, Construction Practice Leader, OneGroup
Construction firms across Central New York are seeing some stabilization in the insurance marketplace after several years of sharp increases. In certain areas, rates are beginning to soften and capacity is improving. However, many contractors are still experiencing higher overall insurance costs, even when rate and premium increases appear more moderate on paper.
The reason is simple: while portions of the insurance market may be easing, the underlying cost of construction risk continues to rise.
From labor shortages and wage inflation to escalating material costs and larger claim settlements, contractors are operating in an environment where even a relatively routine loss can become significantly more expensive than it was just a few years ago.
Locally, the time a project takes to complete has increased, the cost of the materials for that project have increased and the pay scale for the employees executing that project have increased. All those variables can and do drive insurance costs.
What further amplifies those variables is the onset of large local projects like I-81 & Micron that are utilizing much of the local labor force. With companies struggling to find labor to complete their backlog, traditional infrastructure projects and other private projects face longer project timelines. Outside labor is going to become a necessity; subcontracting, is going to become a necessity. Those exposures have insurance costs as well.
One of the largest drivers is construction inflation itself. Material pricing remains elevated across many categories, particularly for electrical components, specialty materials, roofing systems, and mechanical equipment. Even when pricing volatility slows, replacement costs remain far above pre-pandemic levels. That has important insurance implications.
If property values, equipment schedules, or builder risk limits have not been updated to reflect current costs, contractors may unknowingly be underinsured. In a major loss scenario, that gap can become financially significant.
There is also growing concern around project delays tied to supply chain challenges. Longer lead times can extend project timelines, increase exposure periods, and ultimately increase the overall cost of claims.
Labor inflation is creating another layer of pressure. The construction industry continues to face workforce shortages, particularly among skilled trades. As firms compete for experienced workers, wage growth has accelerated. While higher pay can help attract talent, it also impacts claim severity, especially in workers’ compensation.
Medical costs are rising. Lost-time claims are becoming more expensive. Inexperienced workers may require additional training and supervision, which can also influence safety outcomes and insurance performance over time.
At the same time, contractors are managing increased auto liability exposure, rising litigation costs, and larger jury awards across the country. Even relatively small incidents now carry the potential for substantial financial impact.
Active claim management throughout these types of situations is critical. Timelines have slowed everywhere, including the judicial system. Legal costs have increased, which in turn inflates claim costs. Claim costs can also have a direct impact on insurance pricing. Workers’ Compensation EMR’s and Auto Experience Rating can be volatile, actively managing those claims can directly impact these variables, in turn, affecting the insurance pricing. This leads directly into proactive risk management.
For contractors, this environment reinforces the importance of proactive risk management rather than viewing insurance strictly as an annual transaction. Carriers are placing greater emphasis on safety culture, fleet management, subcontractor oversight, cybersecurity practices, and operational controls when evaluating accounts. Firms that can demonstrate strong internal processes are often in a better position to manage long-term insurance costs and secure favorable terms.
This is especially important as projects grow more complex and technology becomes more integrated into day-to-day operations. Drones, connected jobsites, digital project management systems, and electronic payments create efficiencies, but they also introduce new forms of risk that many firms are still evaluating.
While there are encouraging signs in portions of the insurance marketplace, contractors should not mistake a softening market for a reduction in exposure. The hidden costs impacting construction risk today extend far beyond premium percentages alone.
The firms best positioned for long-term success will be those that regularly reassess valuations, strengthen operational controls, invest in workforce development, and work closely with trusted advisors to identify emerging risks before they become costly problems.
In summation, insurance is becoming more complex by the day. But a good partner can walk you through the complexities of the industry and develop a plan that works for you as the contractor. Being active in your risk management program is now critical, and now is the time to do it, if not yesterday. Now is the time to reassess your risk strategy—before these hidden costs show up in your next claim or renewal.
Brett Findlay is a Senior Vice President and Construction Practice Leader at OneGroup, a subsidiary of Community Financial System Inc. OneGroup.com