Construction tech revolution: How digital twins are transforming risk and reward

Construction tech revolution: How digital twins are transforming risk and reward | Insurance Business Canada

Construction & Engineering

Construction tech revolution: How digital twins are transforming risk and reward

“We’re seeing through the use of digital twin technology risk discovery at a much earlier point in time”

Construction & Engineering

By
Chris Davis

In the construction sector, technology and telematics are driving an evolution akin to what we’ve been seeing in the automotive industry. David Bowcott (pictured), executive vice president of Platform Insurance, likened the th transformation to telematics in cars, where sensors track driving behaviours like acceleration and braking.

In construction, Bowcott expects this technology to scale significantly in the next five to 10 years.

“We’re now seeing the amount of digital solutions being used on construction projects, both in the construction phase and the operations phase, getting bigger and bigger,” Bowcott explained. This digital transformation includes the use of what many call a “digital twin”, a virtual representation of a construction project or asset that evolves as the physical structure is built and operated.

“The reality is, it’s a bunch of tech that’s being used during the design and construction phase, and on a more frequent basis, into the operations phase, that, when knit together, provides real-time and in some cases predictive, information about issues manifesting,” he added.

The rise of digital twins in construction projects

Digital twins encompass a wide range of technologies. Project management systems, Internet of Things (IoT) backbones, and operational phase asset management platforms all contribute to what Bowcott describes as a “nervous system” for a built asset. For example, IoT devices monitor everything from water leakage to temperature changes, helping to prevent small issues from escalating into large, costly problems. Supply chain technologies track materials and potential choke points, offering insights into delays or disruptions long before they affect the project.

“There’s digital knowledge being shared about a port being cut off and the impact on materials shipments,” Bowcott said, referring to how these technologies can keep tabs on supply chains and schedules.

One of the most promising aspects of this digital integration is the use of reality capture technology (the eyes of the project).

“You can use reality capture to take a scan of the as-built and compare it to the design,” Bowcott explained. This comparison helps to identify discrepancies, allowing teams to correct issues before they become serious. Artificial intelligence (AI) tools are also starting to detect risk visually, flagging potential problems earlier than ever before.

For insurers, the potential benefits of these technologies are immense. Bowcott describes the idea of a “mitigation delta”—the gap between when a risk is discovered and when it would traditionally be noticed, without digital twin technology.

“Right now, we’re seeing through the use of digital twin technology risk discovery at a much earlier point in time and that is leading to a lesser impact to construction stakeholders and insurers,” he said. This ability to detect problems sooner not only reduces claims costs but also helps insurers adjust premiums based on real-time risk, something Bowcott refers to as “active underwriting”.

Active underwriting represents a shift away from the traditional model, where underwriters relied on historical data to assess risk. Instead, by using the more immediate data generated by the digital twins, insurers can make real-time adjustments.

“It’s data as it happens, being fed into the underwriting model, as opposed to the traditional underwriting model, which utilizes data of the past,” Bowcott added. This means that insurers can offer better terms to clients who proactively manage risk, and clients can secure lower premiums by being more transparent about their operations.

The impact of AI and risk detection tools on construction projects

However, Bowcott acknowledged that the insurance industry is slow to adopt these new underwriting tools.

“It’s like an ocean liner,” he said, noting that while the technology is available, many insurers have yet to fully embrace it. That said, some insurers are already experimenting with this approach.

“We already see it with water IoT devices, and other technologies coming to market,” Bowcott told IB.

The key to unlocking this potential lies in proving the effectiveness of these technologies. Bowcott points to companies like Foresight, Insight Risk, and Shepherd, all based in the US, which have used IoT and reality capture technologies to demonstrate what he calls the “mitigation delta”.

“There’s actuarial evidence this is occurring and that evidence is beginning to release insurance capacity,” Bowcott added.

Still, the transition won’t happen overnight. While some forward-thinking insurers are leading the charge, many are still hesitant to fully integrate digital twins into their underwriting processes. Bowcott draws a comparison to the automotive insurance industry, where telematics has slowly gained traction over the past couple of decades.

“We do think it’s like we saw with cars,” he said. “This is going to be at a much bigger scale and potentially substantial when it comes to the improved profitability of insurers and subsequent improved premium reductions.”

Overcoming the challenges of adopting digital twin technology in construction

For construction companies willing to embrace transparency, the rewards could be significant. Bowcott envisions a future where insurers have real-time dashboards showing the risk levels on specific projects.

“You now have a dashboard that shows you how your contractor client is doing on a specific project or a portfolio of projects,” he said. “Those clients that are willing to be that transparent are going to secure best terms – because you’re probably pretty good at managing risk if you’re willing to be that transparent.”

As the construction industry continues to adopt digital technologies, the relationship between insurers and clients is likely to become more collaborative. With data flowing in real time, both parties will have a clearer understanding of not only the risks involved, but the best way to manage those risks to gain maximum mitigations.

In Bowcott’s words: “In this new age of greater transparency, if you’re going to be naked, you better be buff.”

Platform Insurance Management is a risk advisory and brokerage company whose primary objective is focusing on our client’s industries, like construction and real estate, to deliver risk solutions tailored to the specific issues they face.  The above article is an example of how our understanding of our client’s industry allows for a deeper connection between the risks our clients face and the solutions we delivery to help them mitigate those risks.

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