Now is the time agents can improve and add value to their client relationships as rates rise and capacity tightens within the builders risk marketplace.
After nearly a decade of continuous industry growth, the construction industry experienced a severe decline in revenue because of the global pandemic. With 79% of construction owners concerned about meeting 2021 revenue targets, according to a Nationwide New Agent Authority construction report, now is the time agents can improve and add value to their client relationships as rates rise and capacity tightens within the builders risk marketplace.
President Biden's infrastructure plan will help drive what could be a windfall for the construction industry. “Any additional infrastructure spending will have a positive impact on the construction companies awarded these projects and their employed labor," says Chelsea Bergen, area assistant vice president, Risk Placement Services. “These companies can feel more confident about their revenue projections, as these infrastructure projects typically have long timeframes of 3-5 years."
Nevertheless, “the builders risk market has hardened significantly over the last several months resulting in tightened underwriting standards and less room for negotiating," says Alan Ferguson, president, US Assure.
“From an agent standpoint, when we're looking at trends, we're looking at the change in capacity and rates specific to certain geographic locations," says Kurt Sokolowski, senior partner at TriSure, an Alera Group Company. “Additionally, the hot topic today in builders risk is security, primarily because of the concern of theft of materials."
As the industry recovers with smaller construction projects getting off the ground and larger projects appearing on the horizon, now is the time for agents to work with their clients to understand their needs and share their expertise to acquire the coverage they need.
Here are three tips to ensure builders risk coverage is adequate:
1) Allow sufficient time to review. “It's a lot easier for an agent and underwriter to react to a smaller project," says Linda Stueber, senior vice president of middle market commercial lines, Nationwide. “Larger projects require both the agent and the underwriter more time to analyze, so as soon as an agent starts getting wind that a client might be working on a larger project—that's a great time to get your underwriter involved so you can start the process."
Agents need to “be prepared to provide a variety of information on the project and expect carriers to ask for documents that they historically haven't had to provide," says Ryan Mee, VP and manager, inland marine underwriting, Liberty Mutual Insurance.
2) Differentiate yourself through education. “When your general contractor or developer comes to you with a new builders risk opportunity, be sure you're educating them about the current insurance marketplace," Bergen says. “Regardless of construction type or new construction versus renovation, we are still seeing delays."
Additionally, agents that are hoping to focus on their builders risk book of business in 2021 “will be competing for a bigger slice of a shrinking pie," Mee says. “Education is important and will be a key differentiator, but so is an agency's ability to showcase that expertise to current and future clients."
3) Confirm construction terms. “It's important for agents to reconfirm with the contractor if the construction timeline is realistic given the current environment," Bergen says. “Contractors should naturally factor in weather delays and change-order delays, as well as keeping in mind that construction material shortages and additional delays for inspections are impacting timelines more significantly than they have in the past."
“You need to really understand the coverages and how it relates to the claim when it happens," Sokolowski says. “From the agent side, we've always got to know and understand whose got what appetite and for what classes."
Other terms to consider are those relating to the employment of skilled workers including subcontractors, a construction industry challenge for many years.
“Agents need to pay attention to the available supplemental coverages and help ensure clients are purchasing coverage that fits the unique needs of the project," Mee says. “There is no stock solution for every project and it's more important than ever to tailor coverage."
By working hand in hand with clients by “being proactive in reaching out and then following up with their customers through the normal course of business, agents demonstrate the value they add through their diligence, expertise and initiative," Ferguson says. “Staying a step ahead of your customer and anticipating their needs saves them time and protects their investment."
Olivia Overman is IA content editor.