Table Of Content
- What Trends are Affecting the Insurance Market?
- Four Recommendations For Taking Control of Insurance Costs
- How HCSS Safety Can Help
If you’ve had to face an insurance renewal in the last year, you’re more than aware of the current hard market conditions and dramatic rate increases.
In early September, we spoke with Mike Fredebeil, SVP and North American Director for Construction Risk Control at Willis Towers Watson, Carl Heinlein, Senior Safety Consultant at American Contractors Insurance Group (ACIG), and Jim Goss, HCSS’ Senior Safety Consultant to get their feedback on the hardening insurance market.
Since 2018, construction companies have been facing a hardening insurance market. Mike Fredebeil currently sees moderate price increases for workers compensation and dramatic price increases for auto liability, general liability, and umbrella coverage.
While Q2 2020 workers compensation rates were flat, current trends are showing an increasingly hard market through 2021, including workers compensation.1
Carl Heinlein is seeing that due to the dramatic decline of coverage options, companies want to control their money now more than ever. The insurance market could be worse than the 2008 market conditions.
What Trends are Affecting the Insurance Market?
Continuing Labor Shortages
“The spread of COVID-19 is expected to exacerbate the hardening market for construction, as significant declines in available labor typically give rise to increased losses in workers compensation and general liability.”2
Labor shortages can mean that contract workers or workers with less training are filling in vacant positions. Since these workers have less experience, they can be more prone to work-related injuries, which can increase workers compensation claims.
Carriers Can Be Picky
In the transition from soft to hard market, underwriters are under increasing pressure to focus on profitable underwriting. Insurance carriers are paying more attention to the underwriting and being more selective about who they choose to cover. In addition, as the construction industry grows, underwriters are receiving record submissions.3
As Fredebeil puts it, “price and coverage is based on the comfort level of the underwriters. Right now, underwriters are uncomfortable.”
As competition and rates grow, carriers can afford to be picky and avoid high-risk accounts. At renewal time, construction businesses will likely face increased scrutiny and may need to get creative to “sell” their business to underwriters.3
Extremely High Umbrella Insurance and Excess Liability
“Buyers of excess liability and umbrella coverage faced the one-two punch of soaring rates and a capacity crunch at July 1 renewals.”4
At Willis Towers Watson, Fredebeil is seeing the hardest market in 30 years or more for excess insurance. Lead umbrella coverage may increase by +25% to +50%, and excess umbrella coverage may increase by +50% to +100%.2
These higher rates mean that construction companies applying for umbrella and excess liability coverage are also facing increased competition for coverage. Historical information and creative selling may be required to obtain coverage.2
COVID-19 and Insurance Rates
Heinlein believes we may be facing 12-18 months of negative impacts on insurance rates due to COVID-19. Initial data confirms that COVID-19 could cause a more rapid hardening of the insurance market that may be worse than the 2008 market conditions.2
For example, The California Workers Compensation Insurance Rating Bureau’s governing committee was going to recommend a 1.3% rate decrease for 2021. However, due to the estimated impact of COVID-19 claims, the bureau is now recommending a 2.6% increase in pure premium advisory rates for 2021.5
We are also keeping an eye on states that are passing legislation to define presumptions of compensability for COVID-19. For more information on presumption legislation in your state, please visit NCCI.
What About Captives?
According to Heinlein at ACIG, more construction companies are looking at joining captives as a way to control costs and explore new options in the hard market. So far in 2020, Heinlein is seeing a record number of applicants to ACIG. Applicants are mostly small to medium contractors who are looking to “take the edge off” of their risk and take advantage of the services offered by captives.
Four Recommendations For Taking Control of Insurance Costs
Now is the time to invest in your safety program. Immediate investment in your safety program can help keep your crews safe from injury and COVID-19. In the long-term, you can gain greater control over your insurance rates and increased loyalty from your crews.
Tell Your Story - Address Past Issues
Fredebeil and Heinlein both stressed the importance of controlling your own narrative.
The best way to prepare for an insurance renewal is to put together a strong profile of your company. Be prepared to market your company and safety program to brokers and underwriters. Show what makes your company different.
It’s critical to address your loss run head-on and speak directly to any adjustments in your safety program. You need to let your insurance team know that you understand what caused issues in the past and implemented processes to prevent these issues in the future.
You can ask your current or previous carrier for a copy of your loss run.
Fredebeil went a step further to strongly recommend that companies put together their own profile. After all, you know your company better than anyone else.
Focus on Your Controls - Be Proactive About Future Issues
A critical part of your profile is laying out your risks and controls. Take any opportunity to highlight how you are being proactive with your safety program. Are you holding regular safety meetings or collecting observations?
Now is the time to button up all your safety programs and documentation so you can explicitly address how you’re managing any work zone issues.
Get Everyone Involved
Insurance costs typically stay in the office. But how can you get your crews involved in reducing insurance costs?
Here at HCSS, Goss sees first-hand how companies become successful in safety when they move beyond compliance rules and build a safety culture. The hard market is another reason to educate your crews to think beyond rules and to understand how comprehensive risk management can benefit the entire company.
Education is especially important for subcontractors. With a Contractual Risk Transfer, a subcontractor is liable for their own mistakes. Sub crews should understand their liability and make sure they are following proper safety procedures.
Adopt a Comprehensive Digital Safety Solution
In Heinlein’s experience, a comprehensive digital safety solution can show an underwriter that a company is forward-thinking. Technology can be the glue to help you run your processes and manage risk.
In addition, when you’re collecting and analyzing real-time data from the field, you can see and investigate any issues immediately. Instead of reviewing your data once a year, you can easily review your data every day, identify problems immediately, and pivot fast.
How HCSS Safety Can Help
Show Your Work
When pitching your company to a broker or underwriter, you can show how the individual parts of HCSS Safety are used to minimize risk and create a stronger safety program.
With HCSS Safety, all of your safety records and reports are accessible in just a few clicks. By showing your safety records as part of your insurance negotiations, you can better control your own narrative.
Bringing Outside Perspective
With HCSS, you’re not just a customer - we are here to help your business grow.
HCSS Safety implementation goes beyond software setup. We have a crew of dedicated, experienced safety professionals who can help you get started immediately, gain buy-in quickly, and build ongoing value through improved processes and data.
Think About Business Efficiency - Go Paperless!
How much time and money do you waste dealing with paper records and reporting? The cost associated with paper add up - safety managers may be spending hours working on reporting and managing paperwork.
By going paperless with HCSS Safety, our customers reduce their safety admin time by 33% or more.
Less time working with paper means more time focusing on the strategic aspects of your safety program and optimized safety processes to keep crews safe and reduce workers compensation costs.
Be prepared for your next insurance renewal - set up a call with HCSS Safety today. We are here to help. Give us a call at 800-683-3196 or fill out the form below and we’ll call you.
