It’s no secret that liability and workers’ compensation insurance costs are going up, with the construction industry getting hit particularly hard over the last few years.
A number of factors, including more insurance claims, rising fear of lawsuits, huge losses from the 9/11 terrorist attacks and a weak stock market have all led to rapidly increasing premiums.
In a recent survey of Concrete Concepts readers, nearly 65 percent reported that their insurance premiums have increased by more than 25 percent over the last year. About 30 percent have seen increases of more than 50 percent.
“There’s an increased sensitivity to hidden defects in buildings, especially in residential,” says Don Marks, president of Form Works, Inc., a Fort Lauderdale, Fla.--based commercial concrete contractor. “Some of the insurance companies are just refusing to cover construction companies anymore, and those that will cover it are making it very expensive.”
Besides facing the challenge of insuring his own 250--employee company, Marks is also the chairman of the American Society of Concrete Contractors’ Insurance Committee.
“Contractors are finding it particularly challenging to get traditional insurance,” Marks says. “They have to find alternatives or in many cases go without insurance.”
Lowering your costs
There are several factors causing the insurance crisis.
While contractors can’t change these underlying causes of the rising costs of insurance, there are things you can do to improve your company’s situation.
While there are several components to the formula that insurance companies use to set an individual contractor’s premiums, one of the most important is a company’s history of claims –- how often and how much has your insurer had to pay out.
“Establishing a superior safety and quality assurance program is a contractor’s best approach to reducing claims,” says Jeffrey Segall, vice president of construction for CNA, an insurer whose program is endorsed by the ASCC. “The absence of such a program may make the contractor undesirable, and they might not have the chance to ever see the best and lowest prices.”
Marks recommends having somebody assigned to watch over all insurance claims.
“We have somebody in--house who does that, but there are brokerages that now offer those services, which would be a good option for smaller contractors,” he says. “This can make an enormous difference. Insurance companies don’t always do a good job of keeping you informed, so you need to do it yourself if you really want to manage your claims.”