The stab of inflation is being felt in every industry in the US, even construction. Inflation, in particular, is driving up the cost of insuring construction projects while creating new risk management challenges for contractors. As demand in the construction industry returns to pre-pandemic levels, contractors are facing skills shortages, an aging workforce and ongoing supply chain issues that show no signs of abating in the near term. In addition, credit institutions are increasingly scrutinizing the pre-qualification process, forcing contractors to now ask their subcontractors to source future project materials to hedge against inflation and stave off future supply chain problems. Greg Perruzzi, SVP of Construction Vertical Management at Gallagher Bassett, believes these ongoing challenges are causing the industry to reconsider its approach to risk management as a means of controlling costs.
“The risk has increased in line with material costs and increased labor and the construction industry itself still faces a relatively tough market from a core loss experience perspective,” Perruzzi said. “Inflation only tightens insurance rates, causing insurance units to cost more in premiums and increasing the overall cost of insurance. As a result, we are seeing more and more contractors looking to partner with Gallagher Bassett to improve claims history analysis and improve risk prevention measures.”
Using technology to improve contractor outcomes
As insurance companies, insurers and brokers rely more heavily on analytics to make decisions, construction companies themselves are increasingly focusing on leveraging analytics to uncover insights that can not only help mitigate risk, but prevent incidents in the first place.
“Our design team brings together decades of industry experience and powerful risk management tools like LUMINOS, our award-winning RMIS platform. LUMINOS goes beyond static reporting to provide clients with tailored insights via interactive, dynamic dashboards,” said Perruzzi. “For example, we use our claims expertise and in-house data science resources to synthesize leading and lagging factors, including operational safety tactics and claims history, to create a better risk profile with lower overall insurance costs and better profitability metrics for construction companies. ”
Cultivating a culture of preventive safety and well-being
The lack of available skilled workers is another challenge for contractors. To keep their projects on track and avoid business disruption in this competitive job market, they need to find new ways to attract and retain their workforce. As part of this, contractors are looking for service partners who can help build a culture of preventive safety and well-being, rather than focusing solely on preventing accidents.
“Creating a culture of project-specific well-being helps their workforce feel supported and part of something bigger, which can lead to better work continuity, higher quality work and a reduction in the risk of accidents on a construction site. ‘ Perruzzi said. “More and more contractors are using wellness programs, educational programs and nutrition programs in the field for their subcontractors.”
While wellness programs can be a low-cost, high-impact solution to attracting and retaining contractor talent, changes in state and federal regulations may require even greater efforts, including a complete overhaul of company safety plans to maintain compliance . Finding the resources with the required expertise is critical to mitigating potential risks.
“From a planning perspective, our suite of GB Technical Service solutions provides better pre-planning and ongoing support for creating holistic security programs to keep contractors one step ahead,” said Perruzzi. “That means bringing in the right experts from across the business at the right time to help with the decision-making process, be it our risk control team, managed care consultants or claims specialists.”