The construction insurance market has been firming up for the past few years with several factors driving this change. Some of those determining factors have been higher general liability jury awards / settlements, auto liability awards, and property / equipment climate related claims. The increase in awards is a result of many factors from construction injuries and distracted driving to hurricanes, tornadoes, wildfires, and other climate events. These circumstances have caused carriers to change the way they write policies. It has resulted in restrictions around types of coverage; reducing their capacity for higher umbrella / excess liability limits; and increased pricing on general liability, business auto, excess liability, and other lines of coverage.
Based on industry data, we are seeing general liability rates increase around 8-12%. Other areas are increasing as well. This includes business auto around 10-15%, umbrella / excess at 15-20%, employment practices liability around 12-15%, and cyber liability 10-12%. Each of these increases can vary though depending on type of contractor, size and scope of operations, geographic area, and individual claim history.
While external factors cannot be controlled, there are ways to mitigate against market conditions. Keeping your “Total Cost of Risk” (TCOR) down to .0075 - 1.5% will help against external factors and maintain a competitive advantage. The TCOR is premiums + claims + deductibles + risk management expenses / construction revenues.
Below are a few “best practices” of a risk management program that will help achieve those results.
5. Alternative Marketplace: In going through the renewal process there could be some discoveries along the way about what the business can handle. For example, it may be discovered that taking on more risk by securing higher deductibles or retentions is feasible. Conversely, it may be found that having a construction captive feasibility study performed may be the best option. This will determine how a group or single cell captive can benefit the business.
At AssuredPartners, we represent thousands of construction clients nationwide with 190 offices to serve you. Contact our experienced team of construction professionals to help you achieve your lowest possible Total Cost of Risk (TCOR) and build your business.
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