With Construction Booming, Agents Can Help Contractors Avoid Big Risks

Times are good for contractors, with an active market creating an abundance of work, increasing revenues, and business growth. In 2021, President Joe Biden signed a $1.2 trillion infrastructure bill and over the next five years, it will deliver $550 billion of new investments in America’s infrastructure. The law will impact and influence construction across America and will create new opportunities for contractors to profitably grow their businesses, assuming, that is, they don’t spread themselves too thin. In times like these, experienced agents can help their contractor clients prepare for and minimize risks associated with new jobs.

In these heady times, many contractors are eager to bid on projects. The most experienced and successful understand the scope of the projects they take on and recognize how jobs can impact their business risk, so avoid making commitments they can’t keep. In the coming months, deciding which jobs to bid on based on capacity and expertise will be critical, and strategic independent agents can help. As contractors prepare for this influx of work, here are some common risks to consider.

Understanding the requirements of public vs. private jobs – Contractors need to know whether a job is public or private, as each project type might involve different insurance considerations. Public jobs tend to require higher limits and have very strict guidelines for insurance coverage terms compared to private work where there is often more flexibility in required coverage.

Material and supply chain issues – There are several external factors at play when it comes to completing a job on time. With construction materials now often difficult to obtain, contractors may have to adjust plans to meet deadlines. When a contractor chooses to use new materials or techniques because of a supply chain delay, there is likely employee training required to understand or review the installation process. This additional training can add time to the project. Furthermore, the unknown of using a new product or technique can present different challenges, including product durability or warranty challenges. The availability of products needs to be a consideration when contractors decide to bid on new work from both a pricing and a timeline standpoint.

Labor shortage challenges – Manpower issues have plagued the industry for years. Contractors are left scrambling to find qualified people to do the work, resulting in many contractors falling behind or having a backlog, and this is only worsening as construction demand increases. While new projects create great opportunities, contractors who may already be facing a labor shortage want to ensure they will be able to adhere to the construction schedule. When it becomes difficult to find good talent, contractors are wise to avoid hiring unqualified workers. Considerations for safety, quality, and productivity are even more critical in a tight labor market.

Finding qualified subcontractors also comes into play here—a general contractor may be forced to expand their bench of subcontractors. General contractors should maintain a high bar for subcontractor qualification and risk transfer when partnering with new subs. It will be very important for contractors to remain vigilant of the best practices to help maintain good loss experience and history—and protect their reputation.

Helping customers prepare for risk – Agents can partner with their construction clients to ensure they are prepared to capitalize on opportunities at hand while managing risks, by ensuring their insurance program addresses the following:

• Workers’ compensation strategy – The dynamics of the labor market are making it more critical to have a comprehensive workers’ compensation strategy to help injured workers get the care they need and return to work safely. Contractors should consider the value-add services available to them when facing a claim, including nurse triage and return to work services. In a highly litigious environment, partnering with carriers who have the expertise to handle complex claims is essential. This is important in defending claims through proper contractual risk transfer and in the ability to have experts who can litigate complex liability claims. Leading carriers often have specialists who can consult on the job site with loss control services to help stay ahead of claims as well.
• Coverage considerations – With so many risks in the construction industry, it is critical contractors work with insurance carriers that understand the necessary protection considerations. Contractors should partner with carriers that have the flexibility to support higher limits and coverage needs to meet the terms of both private and public jobs that will arise from the infrastructure bill. In addition to supporting varying levels of coverage, carriers who can offer coverage across state lines will be critical as contractors take on larger-scale projects.
• Contract surety needs – Bond requirements will also accompany many of the projects arising from the bill. This means contractors will need to have the right contract surety solution to enable them to navigate unforeseen risks and deliver their projects on time and within budget. With this influx of work, it is more important than ever to proactively consider surety bond placement, as part of a construction clients’ risk management program. Partnering with a carrier that can provide support for payment and performance bonds will enable agents to deliver a more cohesive solution and greater value for their construction clients.

To successfully take advantage of the new construction jobs resulting from this bill, contractors need to fully understand the project demands and the potential risks to their business. Consulting with a knowledgeable independent agent and understanding the offerings from insurance carriers can help contractors achieve success.