Construction Insurance Market Continues to Tighten
If you run a construction firm, you may be wondering what’s on tap for your insurance renewal. In fact, that’s a good question to ask several months ahead of your renewal because conditions are challenging. The commercial insurance market has been hardening for a while now, and the construction industry is no exception.
According to Engineering News-Record, the construction insurance market is expected to continue to tighten. This means higher premiums, and some policyholders may see double-digit increases for general liability, builders’ risk and subcontractor default insurance. In the current environment, you may also face stricter limits and more restrictive coverage terms.
The challenging insurance environment is partly due to a convergence of adverse industry conditions, ranging from COVID implications to labor and supply chain woes, and evolving legislation. Let’s take a closer look …
COVID’s Ongoing Impact
In 2020, New York had the fourth-largest construction sector in the country, according to the New York State Comptroller. The state was hit hard by COVID, however, and 44,400 construction jobs were lost, the worst decline in more than 25 years.
Construction Dive says that COVID-19 cost the New York City construction industry $9.8 billion, according to a report from the Building Trades Employers’ Association. Recovery from the effects of the pandemic is expected to take at least five years.
The Delta variant and new surges may be slowing down recovery. According to the U.S. Chamber of Commerce Q3 2021 Commercial Construction Index, 60% of contractors are experiencing project delays due to the pandemic, and 38% says they have worker health and safety concerns.
Labor and Supply Chain Woes
Contractors are also facing labor shortages and supply chain issues, and it’s impacting their ability to take on and complete projects.
According to the U.S. Chamber of Commerce Q3 2021 Commercial Construction Index, 62% of contractors say they’re dealing with reduced availability of building products. Nearly all contractors are having difficulty finding skilled workers, and 42% have turned down work as a result, while 73% say it’s been challenging to meet project schedule requirements.
A New Wage Law
While New York contractors try to bounce back from the pandemic, they will also have to contend with new wage requirements.
New York Governor Kathy Hochul signed New York Senate Bill S2766 in early September. According to the National Law Review, this new law continues New York’s expansion of worker rights. Under the new law, contractors assume joint and several liability for wages owed to the employees of its subcontractors. To ensure that workers are being paid the wages owed, general contractors will also have new authority to oversee the books of subcontractors.
New York State Senator and sponsor of the bill Jessica Ramos said, “The New York State Senate is taking action to protect construction workers from the hundreds of millions of dollars that are stolen them every year by unscrupulous contractors and subcontractors.”
While this is good news for workers trying to get the money they’re owed, it means more responsibility – and therefore more risk – for general contractors.
Securing Insurance Coverage
According to the Q2 2021 P/C Market Report from the Council of Insurance Agents and Brokers, insurance premiums have increased for 15 consecutive quarters. Underwriting has tightened significantly in certain lines, and 70% of survey respondents report reduced capacity for umbrella insurance.
The bottom line: Don’t assume that this year’s renewal will be business as usual. Start early and be prepared to creatively collaborate with your broker to secure the best rates and terms available. This will may involve shopping the market.
Even if your renewal is still several months out, start the paving the way for success now.
Manage risks to make your account as attractive as possible.
Shore up loss prevention policies, practices and procedures.
Review open claims and reserves with your broker and find ways to close as many claims as possible.
Review your contracts and tie up end loose ends that could be viewed as contractual liabilities.
Anticipate complications during the renewal process and work with a broker (like BNC Insurance) that has multiple markets available.
Budget for rate increases.
As your partner in New York Construction Insurance, the team at BNC is here to help you every step of the way. Reach out and start a conversation.
