Insurance has traditionally been about 2% to 3% of the cost of a project, but the price for coverage has doubled in some cases, depending on the project's risk profile.

Contractors may struggle to find carriers with the capacity to provide coverage at an affordable rate. Since mid-2019, the areas of coverage hardest hit are excess casualty, builder's risk and professional liability.

If contractors have spoken with underwriters recently, they have probably heard about the impact of social inflation. The term is used to describe rising costs of claims resulting from increased litigation and to justify the higher pricing environment. The frequency of wood-frame fires, complex water intrusion claims, named windstorms and wildfires across many areas in the U.S. exacerbate the P&C pricing environment. However, the overall social climate is causing carriers to be more deliberate in assessing coverage and the current claims investigation process can actually take longer and require more effort for all parties than as it did in the past.

However, with comprehensive and accurate data and analytics and best-in-class brokers, contractors can cut through the buzzwords to understand the core issues that propel insurance costs for their specific projects. Contractors can use these three strategies to mitigate expenses and build a more robust capacity for risk management.

Use Facts, Not Feelings

Many contractors assume that their brokers' relationships with carriers will be enough to help them weather the challenging pricing environment. They may find that relationships are not sufficient to drive the results needed. Contractors often operate on razor-thin margins. Restraining insurance costs can mean the difference between a profit or a loss for many contractors.

Contractors shouldn't accept the status quo. They must be proactive when it comes to pricing and looking at their risk exposures holistically. This approach will help minimize the challenging pricing environment.

What does it mean to be proactive? Some contractors start six months in advance before renewals. Proactive contractors get in front of underwriters and have their questions answered. Underwriters may then be willing to adapt to a changing marketplace and reconfigure their coverages to provide an optimal of protection and value. It's about facts, not feelings.

More information is better than less. The days of underwriters being able to get by with just minimal information don't exist anymore. They want to understand all aspects of how a contactor handles risk, protection, safety and quality.

It's not as if every single contractor will receive a rate increase. The ones that keep their rates flat or decrease them proactively use facts and figures to back up their positions of why they think they're a better risk than others.

Embrace More Technology

Despite recent advances, the construction sector is still lagging behind almost all the sectors of the economy when it comes to data sophistication and technology adoption. This lack of data sophistication is primarily due to the way the industry operates. Contractors can gain a significant advantage by developing more methods of data collection.

Valuable knowledge generated by contractors is the data available when they transfer the newly completed asset back to the owner to operate and maintain. This data can be used to improve the efficiency of both the construction and asset management industries. Plenty of construction technology companies offer platforms or point solutions that can capture this critical data easier, but finding the ones that fit a contractor's needs can be daunting. Contractors should look for partners that can provide unbiased advice to help reduce the confusion and accelerate adoption.

In a crowded field, contractors should consider solutions that measure or reduce risk. Wearable sensors can enhance employee safety on the construction site. Artificial intelligence identifies safety hazards and construction defects through continuous visual data analysis from project sites. Analytics platforms can provide risk managers a clear view of workplace safety, incidents and claims data through a single dashboard.

Contractors who deploy risk-reducing tech and incorporate the results into a data-driven argument to maintain or lower rates will be perceived more favorably by underwriters in the marketplace. The industry is awash in lagging indicator data, such as safety reports and loss histories. Embracing technology to help improve risk also drives the collection of leading indicators, including real-time observations of risk and behavior on project sites.

Consider Innovative Coverage Options

As construction projects nationwide continue to be impacted by ongoing economic uncertainty, many contractors and owners are looking to their insurance programs to assist with project delays, disruptions and third-party claims.

In addition to focusing on data and technology, contractors need brokers with the know-how to find insurance capacity when it is limited. It helps to work with a broker that has extensive experience in the construction industry. Brokers should seek to utilize their benchmarking capabilities so their clients' needs are met with innovative solutions.

Given increased market challenges, contractors should consider all the possible options to lower insurance costs, including appropriately identified higher deductibles, risk transfers, alternative placement structures, reinsurance capacity and captive solutions. The ultimate answer depends on the contractor, and may even involve separate strategies for different high-risk operations within a company.

The marketplace is evolving and so should a contractor's approach to reviewing risk exposures. Less than one in four contractors use employment practices liability insurance (EPLI), which generally provides coverage for certain defense costs, damages and other enumerated expenses related to workplace lawsuits. Given the construction industry's risk factors, workplace claims of wrongful termination, harassment, and discrimination can be monetarily significant and EPLI can help the industry respond to those risks. The same goes for emerging risks related to cyber coverage. The insurance industry offers more than $1 billion in capacity via 75 unique markets to help contractors transfer exposure to this peril.

It is important for contractors to maintain a broad perspective relative to the cycles of the U.S. property and casualty insurance market. A hard pricing market today becomes a buyer's market tomorrow. Some $7 billion to $8 billion in new capital is expected to enter the U.S. property and casualty insurance market next year, increasing capacity by roughly 1%. Using data, tech and selecting best-in-class partners, contractors can aim to overcome the risk challenges they may face and focus on excelling in their core business.