Despite its continued growth, the construction industry has seen its fair share of challenges in the past few years. According to Woodruff Sawyer, a major insurance brokerage and consulting firm in the U.S., in 2022 “previous issues related to COVID-19 were replaced by new challenges, including inflationary pressures, international supply chain disruption, and economic uncertainty.”
Under these new terms, construction insurance is now in a delicate position. With that in mind, let’s see some of the main pain points for construction industry insurance and how they can be alleviated.
Over the last decade, more and more skilled workers keep retiring, leaving a gap in the industry that is not easily filled. There are increasingly fewer young workers who choose the construction industry and develop the skills necessary to actually turn it into a long-term career. Add to this the recent labor shortages caused by COVID-19 lockdowns, and you’ve got major wage and benefit pressures.
Labor shortage may very well continue to plague the construction industry. But there are some ways to go around this. First of all, as a construction worker, it’s important to invest more time and money in training and make sure to attain the experience you need. Secondly, as a contractor, you should look for ways to increase project productivity by using management tools and technology.
Inflationary pressures are growing by the day, and the construction industry is in no way protected against price escalation. For contractors, the main problem is that contract terms were not originally designed with the current economic conditions in mind. To mitigate this situation, contracts should be adjusted to better reflect the new reality.
These changes can include: relief for changes in law, order rights adjustment to reflect inflationary pressures and material shortage, limitations of liability, and waivers of consequential damages.
When it comes to supply chain disruption, one solution would be to rely less on suppliers who cannot deliver due to COVID-19 shutdowns, war, prime material shortage or other nationwide issues, and to have multiple sources for each individual material.
The best way to protect yourself as a contractor as well as your team is to procure Builder’s Risk insurance coverage. This type of property insurance covers a wide variety of risks involved in construction work, such as fire and high winds, and indemnifies the insurance holder against these particular losses.
Gallagher, an insurance brokerage, risk management and consulting firm, points out that “Builder’s Risk policies come with many endorsements to cover potential risks and sublimits. Getting the right policy for each project requires an understanding of the project and the project needs.”
Depending on your individual needs, your construction insurance coverage should allow for completion delays, debris removal, extra expenses and soft costs, as well as exclusions for faulty workmanship and water intrusion.
We know it can be hard for contractors and construction workers alike to maintain hope in the face of economic instability and growing recession fears. But thankfully, wholesale construction marketplaces such as AMAST make it easy for everyone to connect, procure high-quality materials for their projects, and save valuable time and money in the process.