While construction spending in the first two months of this year ($157.1 billion) was 11.2 percent higher than it was for the same period last year, and experts predict it will continue to grow at a modest pace due to low mortgage rates and increasing demand for new homes, volatility in other U.S. markets—as well as the world—hint at the potential for another recession.
Construction company owners—though most are cautiously optimistic—may remain focused on reducing operational costs as a result. While it’s generally wise to embrace strategies that result in meaningful financial savings—such as adjusting staffing levels and the use of new tools to improve efficiencies—keep in mind these risks you may not have considered.
Risk: Construction Labor Shortage
During the recession of 2008, the number of construction workers in the U.S. contracted. Many were forced to leave the industry in search of other work, and some contractors have struggled to meet labor demands ever since. This shortage of skilled workers has had a direct effect on workers’ compensation claims. Fewer construction professionals—many with little experience—working more hours can easily lead to more on-the-job accidents. By some estimates, short-staffed construction companies could see their accident-related losses increase at least 30 percent. This, in turn, will increase their workers compensation insurance premiums.
Risk: Design-Build Liability
Design-build construction projects are becoming increasingly prevalent as fewer nonresidential and residential builders continue to use the traditional design-bid-build contracting method. While this shift in business model has the benefit of increasing collaboration and productivity, it can also expose contractors to greater professional liability risks.
Contractors whose general liability insurance does not include protections for design work remain exposed even when that work is subcontracted to another entity. As such, it’s recommended that you close the professional liability gap by purchasing your own professional liability policy with conditional design coverage rather than rely on general liability coverage alone.
Risk: Cyber Security
Adoption of technology can help contractors improve services and meet bid requirements as well as streamline the workflow and reduce timelines. However, the more technology you use, the greater your cyber security risks. To minimize these risks and protect sensitive employee and project data, contractors and construction company owners should implement a cyber security risk management strategy. This includes evaluating your company’s current IT security, reducing the potential for breaches, and investing in cyber liability coverage.
Is your company fully protected from these risks? Give us a call today to discuss your current insurance policies and possible adjustments or additions to provide you with greater protection.