From the Front Lines: Builders Risk

How did you get started at your agency?

I was working for another agency locally when a producer from Lipscomb called about an account manager position because I had a background in construction and real estate. I knew the agency by reputation and was intrigued to be working for a family-owned agency after spending many years working for national- and bank-owned agencies.

I was excited to join the agency and help them grow their general commercial division from the ground up—that was nine years ago. In 2015, I was promoted from account manager to vice president of operations as the first non-family member to become an officer of the corporation since the agency’s inception in 1960.

Why builders risk?

In March 2014, we picked up a new client who was a family office-owned organization with multiple operational divisions. This client was the platform for what has become a successful division of the agency, leading to referrals and introductions to other clients in the real estate development space.

From a personal standpoint, I love construction and building things. Being able to watch the progress of a project go from empty land to a beautiful building and knowing that you were a part of that is exciting and fulfilling.

Biggest builder’s risk challenges?

Meeting pricing expectations while still making sure your client is protected. As an insurance professional, I take very seriously my responsibility to provide our clients with detailed information about their exposures at a price they can live with so they can make an educated business decision that best protects their interests. Making sure our clients know what they are purchasing and what exposures they might choose to self-insure is very important to me and our agency.

Biggest builders risk changes?

Claims frequency and severity. In 2018 especially, natural disasters have led to record-breaking claim payments. This, as well as underwriting caution in coverage extensions that were readily available even six months ago, make each project we work on uniquely challenging. In the future, I expect to see continued increases in pricing as well as limited capacity in CAT-exposed areas.

Builders risk advice for a fellow agent?

Construction insurance, especially if you are working with new construction, is a “hurry up and wait” game. Your clients create their budgets early and the project start date is often a moving target, making construction risk, especially builders risk, an industry sector that takes patience and planning in your pipeline flow.

Favorite builders risk success story?

I was introduced to a new project manager for an existing client that we had worked with on other projects. This project manager was new to this facet of construction and had put together a budget for his ownership without discussing the insurance costs with us first. This budget was already approved by ownership and the project was given the green light to move forward.

By the time they came to us to put together the insurance program for the project, financing was already in progress. As soon as I received the construction budget and saw what they had budgeted for insurance, I knew we were in trouble. The original insurance cost projections we presented were 200 times what they had budgeted. These kinds of budget deficits can kill a project completely.

We spent significant time discussing coverage options with our carrier partners and were able to present the client with three unique program options. In the end, after much counseling with the client and a little insurance 101 with the new project manager, we were able to help them make a decision that met the requirements of their lenders and provided a well-protected program.

Needless to say, we didn’t meet their original budgeted numbers. But we were still able to help get their project underway with a revised budget.

Will Jones is the IA assistant editor.