In the construction sector, risks are complex and have been exacerbated by global economic trends. Now, innovative risk solution services, combined with a data-rich approach, can mitigate problems before they occur, says Valarie Jonas, director of Construction Claims, Markel.
Construction firms face a compounded set of risks in the post-COVID-19 world. From stubbornly high inflation to skilled labour shortages and spikes in demand for materials that are meeting supply shortages and supply chain interruptions head-on, the challenges are myriad.
But insurers can help the sector deal with these complex and interrelated pressures using innovative solution services, says Valarie Jonas, director of Construction Claims at Markel.
Jonas says that the current risk landscape in construction has evolved for a number of reasons.
For example, the current shortage of skilled workers in the US is down to the fact that the skilled labour force is retiring.
“Unfortunately, there isn’t an experienced workforce behind them to replace the retiring workers or to provide the necessary supervision and training for projects,” she says.
In spite of this skills shortage, building projects are still pushing ahead, which means fewer safety meetings are happening.
“This creates an environment where we’re seeing a concomitant uptick in significant worksite injuries, such as falls from heights or trench collapses,” Jonas says. “These are really terrible, needless, and often fatal incidents that can be avoided. An experienced foreperson would be able to implement basic safety precautions to prevent such accidents from happening.”
Jonas expects skills shortages to manifest themselves in a rise in construction defect claims further down the line.
On top of this, a spike in demand for materials has come just as the supply chain is being throttled by shortages and interruptions. A much-in-demand roofing material, thermoplastic polyolefin (TPO), illustrates this well.
“Roofers in Texas are unable to get this essential product for eight months out even if they’re a preferred vendor or client,” Jonas explains.
“When you can’t get the materials, it delays the job, which leads to trades walking off the site because they’re not being paid right away.”
Delays create greater potential for risks, as the longer a project remains unfinished, the longer it is exposed to weather. Jonas emphasises that this can lead to potentially serious construction defect claims once the project is finished.
Extreme weather also presents a “significant challenge”, she says.
For ongoing projects, Jonas is seeing weather impacting the sequencing of the building, which again gives rise to construction defects. For example, if the building is not wrapped at the time of a storm, the crew has to leave, the storm comes in and the crew comes back and wraps a now wet building—increasing the likelihood of defects moving forward.
Spotting risk transfer failures
The challenges are big but, Jonas says, data and innovative solutions can provide support.
“Data has enabled us to identify common issues in construction claims.” Valarie Jonas, MarkelMarkel uses data mining to assess loss trends for construction. This helps the insurer identify where those claims will be in the future and what they might look like.
“Data has enabled us to identify common issues in construction claims and to make proactive decisions to support customer needs,” she says.
With such trend insight, specialty carriers are well placed to help mitigate some of these risks, she adds.
For example, a construction contract should be a valuable risk management tool where liabilities are equitably distributed among the contracting parties. “Risk transfer is the name of the game,” Jonas adds.
But Markel’s data analytics has revealed a pattern of failure of risk transfer that was caused by contractual language between the parties, or restrictive insurance coverage, or both.
To solve this issue, Markel’s underwriting, claims and Risk Solution Services (RSS) teams are collaborating on a project to provide third-party insurance verification services and contract review to construction clients, in addition to working with the data.
“The aim here is to help our insureds improve risk transfer mechanisms by validating subcontractor coverages in place and ensuring they are adequate should a claim occur,” Jonas explains.
Another innovation she is excited about is the Markel claims dashboard. With this, the insurer can review daily assessments of the operational claims key performance indicators. This in turn promotes data-driven decisions in real time and continuous process improvements for claims.
The RSS team is partnering with the insurer’s brokers and insureds to help identify gaps in cover, look for areas of risk that could be better controlled, and offer solutions to reduce loss risk through onsite reviews or virtual engagements.
“RSS can provide risk-specific guidance to underwriters and customers in real time on topics such as risk transfer, safety and quality control. And where this meets up with claims, we work very closely with RSS,” Jonas says.
“We see day to day what the claims look like, where they’re happening, their nature, their scope, and the trends. We share that information with RSS, which works closely with the insureds to develop mitigation strategies.”
The whole approach enables Markel to build up a very detailed picture of what’s happening, where and why, as well as identifying where the most effective steps can be taken to mitigate and manage the risk, with collaboration being key.
“All the different aspects of the company come together in that regard,” Jonas concludes.
Markel, Valarie Jonas, Construction, Innovation, Technology, Risk solution, Risk transfer, Data, Claims, Insurance, Reinsurance