Uncertainty has defined the construction landscape for several years now. Just look across your own company. You’ve likely seen changes to your business, projects, employees and clients.
That change can alter your business’s risk — and the insurance necessary to protect it.
Persistent inflation has increased the cost of projects. Supply chain constraints, while improving, have limited the speed of access to materials and equipment. And despite the industry’s growth, skilled labor availability is still catching up with demand.
There is good news, however. Sectors like nonresidential construction are seeing positive momentum in 2024
after spending finished 2023 up more than 20%.
With the industry primed for growth, one quality will continue to separate the most successful businesses. Contractors who understand emerging risks — and implement strategies to mitigate them — will be better prepared to meet schedules and manage costs.
Here’s what to prepare for this year.
1. The Lingering Effects of Inflation & Repair Costs
While inflation has eased, construction input costs are still 39% higher than pre-pandemic. That means the cost to repair and replace materials, tools, structures and equipment is also higher.
If your insurance hasn’t kept pace, you may have gaps in your coverage. The consequence could leave your business underinsured and prone to larger out-of-pocket costs following an incident.
Consider the risks that could affect your property. Fires, theft and storms damage jobsites every year.
The takeaway: If you walk away with one tip from this article, make it this — Schedule an updated property valuation.
It’s the best way to account for the rising rebuilding and replacement costs since your last renewal. Remember, it’s better to identify gaps in your insurance now, rather than after a loss.
Once you have an updated property assessment, you’ll be better equipped to cross-check your insurance coverages. Here are a few areas to review and update in your policy:
- Builder’s risk insurance
- Installation floater coverage
- Contractor’s equipment insurance
It’s worth noting that contractors are also starting to see more vehicle accidents as cars return to the road. Just like the materials on your jobsite, vehicles cost more today — and so do their repairs. Given the number of employees who may drive for your business, it remains imperative to review your policy limits and emphasize safe driving habits.
2. Weathering Storms, Project Timelines & Business Interruption
Completing projects on time and within budget are pillars to success. Unfortunately, Mother Nature
can change plans. In the U.S., 28 weather events exceeded more than $1 billion in damages, setting a new record in 2023. Incidents ranged from convective storms and tornadoes to hail and heavy rain events.
Given the outdoor exposure of construction work, weather damage is becoming less of an “if” and more of a “when.”
As severe weather becomes more frequent — and costly — your business could face greater downtime due to supply chain constraints. Even as the supply chain improves, it’s often difficult to account for demand surge, which occurs when a region sees significant requests for similar products or materials, often exceeding the available supply.
The takeaway: Today, it may take months longer to resume operations compared to several years ago. Review your business’s emergency response and business continuity plans to make sure your business, and employees, are prepared. Regular drills can help you test your plans and identify updates.
You can also help your business stay financially protected by accounting for longer delays in your business income insurance. Think of it like disability insurance for your business. It can help cover lost income, payroll and necessary operating costs while your business recovers. You may already have this coverage within your policy. Just make sure it accounts for potential delays.
As an example, you may have four months’ worth of coverage, but may need eight. An agent can help you calculate a recommendation specific to your business based on what they’re seeing in your region.
3. Skilled Labor Availability & Injury Risks
According to Associated Builders and Contractors (ABC), the industry will need to hire more than half a million additional workers on top of normal pace to meet demand in 2024. In many cases, businesses may rely on new, less experienced workers to enter the workforce.
This comes at a time when injuries are up 7.5% according to the Bureau of Labor Statistics (BLS). Meanwhile, first-year employees account for more than 25% of all workplace injuries.
The takeaway: The numbers above are a stark reminder that every business needs to stay committed to thorough, consistent safety programs to reduce injury risks. Regular safety training topics should include, but aren’t limited to:
- Fall protection — Working at heights, scaffolding requirements, ladder safety and fall arrest systems.
- Electrical hazards — Lockout/tagout procedures, overhead power line safety, wiring and extension cords,
- and grounding.
- Personal protective equipment (PPE) — Proper selection, use and maintenance of hard hats, safety glasses, gloves, respirators, high visibility clothing, hearing protection, footwear, etc.
- Hazard communication — Understanding safety data sheets (SDS), labeling and protocols.
- Material handling — Proper lifting techniques and preventing repetitive movement injuries.
- Heavy equipment — Operator training, equipment inspections, spotter visibility, ground worker awareness.
- Trenching and excavation — Establishing safe entry and exit points, installing protective systems, understanding environmental hazards.
Keeping your team safe is motivation enough. But if you show a track record of low workplace injuries, you could also see lower workers’ compensation costs over time. It’s a win-win for the health and safety of your business.
Start the Conversation
Risk will always exist throughout the construction industry. By embracing safety and reviewing your financial protection, you can make your business more resilient to risk.
The trends here should offer a good starting point for the next conversation with your agent or insurer. No two businesses are alike, though, and neither are their risks.
Before project deadlines pick up, take the time to talk with your team and local experts to create a plan specific to your business.
In the meantime, stay safe.
