What Contractors Need to Know About De-Risking Their Business
As the year comes to a close, most contractors are also nearing the renewal of their current insurance policies. Risk has run rampant in the industry; escalation of insurance premiums plus dwindling backlog as we approach 2021 means uncertainty with regards to financials.
Business Money claims insurers’ severe economic losses following the Covid-19 pandemic are estimated to top $200 billion, and will only lead to further coverage erosion in the guise of new exclusions, higher deductibles, lower limits and more disputed claims.
“Insurance should be viewed as not just a way to protect assets, but as an important component of meeting the financial goals of an organization. With a larger workforce working from home, it’s more critical than ever to remind employees to remain diligent.” - Leslie Curry, Executive Vice President, Construction Services Group, Alliant Insurance
Though we work in an inherently risky business, there is some risk that has become much more prevalent this year.
Prices in insurance premiums are rising due to a few new factors:
- Increased losses in claims that may be atypical
- COVID incidents on job sites may be marked as an OSHA incident
- Business interruption claims
- Builders risk (course of construction)
- Cyber breaches due to the amount of employees working from home
How contractors will be impacted by increased premiums is unknown, but any impact will certainly be reflected in their G&A. The unfortunate reality though, is that insurance is not optional in construction. In order to do business, contractors must provide certain minimum coverages to work on specific projects. Another unfortunate reality: this isn’t cheap.
With backlog decreasing industry-wide, it's hard to find the money to pay for significant cost increases on overhead items.
Here are some strategies to de-risk while staying profitable:
- Consult with your risk department or manager and make adjustments to strategic financial plans
- Consult with your finance department- including CPA and tax expert- to identify areas for G&A savings
- Consult with your insurance broker to craft the right cyber and ransomware policies
- Utilize job site safety technology like wearable tech and drones, paired with data analytics technology, to identify and mitigate risk in the field
- Utilize search technology to help build backlog identifying new projects in your area that are best suited to your company’s expertise
- Build “what-if” models that help you plan for best case/worst case scenarios
- Talk with peers throughout construction trade associations to find out how your colleagues are tackling these new risk challenges
Though we live in an often unpredictable business environment, there are ways we can mitigate risk to keep our people and our businesses safe. With more changes to policies, premiums, and safety in general, it’s important to note the versatility of construction financial managers. By being proactive, adjusting strategic plans, and harnessing the power of technology, contractors will find greater success in managing and mitigating construction risk in today’s evolving market.
The Briq team would like to thank Leslie Curry for her expert insight on this topic.
Briq is the first data analytics platform built specifically for construction. We help contractors use their data to drive better outcomes for all phases of construction. Using modern technology such as automation, machine learning, and predictive analytics, Briq helps to stop fee erosion, freeze overhead costs and provide better financial outcomes for your business. Contact us for a free consultation to see how Briq can serve you.