By Gary R. Semmer, AssuredPartners
The Construction Industry is facing a number of “external” challenges, ranging from materials price inflation, supply chain delays, to labor shortages, that translate into scheduling, productivity and profitability issues. Although you may have no control over these external factors, you can help control your Total Cost of Risk:
Total Cost of Risk (TCOR) Premiums + Deductibles + Risk Management Expenses/Construction Revenues= .0050% to 1.5% (acceptable range) and maintain a “competitive” advantage.
Let’s explore the “Best Practices” of a Risk Management Program to achieve these results:
∙ Safety Program/OSHA Compliance: Review every element of your program including safety manual, safety orientation & training, and OSHA compliance with your safety director or other responsible individuals. If you use a third-party safety consultant, consider having a mock OSHA audit performed to avoid steep fines and reputational harm should you get pulled into an OSHA situation. Share these results with your insurance carrier’s loss/risk control rep or consultant to demonstrate you’re doing everything possible to mitigate risk.
∙ Claims Management: Review your past five years of claim history/loss runs for frequency trends and severity claims to determine how you can either avoid them or mitigate them in the future. You should also perform a periodic claims review with your insurance broker & insurance carrier to close out older claims that can impact your Workers Compensation EMR, General Liability & Business Auto premiums.
∙ Contract Review and Compliance: Set up a standard contract review process to make sure your insurance program aligns with the insurance requirements in contracts your signing. This will avoid any surprises that can land you into a “breach of contract” claim and lead to possible litigation with upstream parties with whom you’ve contracted.
∙ Renewal Preparation: Making the above steps an “ongoing process” will put you in the most “favorable” position as you start the renewal process three to four months prior to the renewal dates.
First step in prepping for renewal is to meet with your insurance broker to review renewal updates (i.e. Payrolls, Sub-work values, Equipment and Vehicle changes) along with any updates on Safety/ OSHA issues and open claims that will impact your renewal program.
Next, based on market conditions, you should discuss what your current carrier(s) renewal appetite is, and whether you need to go to market and seek alternative proposals. If your current carriers are going to restrict any coverage, require higher deductibles/retentions or increase rates outside of the normal range, then ask your broker to select two or three carriers who fit your risk profile. Have them prepare submissions to go to market and set a deadline of three weeks prior to renewal to review and evaluate proposals.∙ Alternative Marketplace: In going through the renewal process, you may find that you are in a better position to take on more risk by securing higher deductibles/retentions. Conversely, you may be “captive ready” and may want to entertain a Group or Single Cell Captive program to take control over your program.
About the Author
Gary Semmer, CIC CWCA, is Executive Vice President and Construction Practice Vertical Leader with AssuredPartners. Gary specializes in providing Insurance & Risk Management solutions to the Construction and Real Estate industries. He has served as President of the Independent Insurance Agents of Illinois (IIAI) and Associated Risk Manager (ARM) of Illinois. At AssuredPartners, we represent over 20,000 Construction Clients nationwide with 200+ offices to serve you. Contact our experienced team of Construction & Surety Professionals to help you achieve your lowest possible Total Cost of Risk (TCOR). AssuredPartners is the 11th largest Insurance Broker and Consultant in the country providing Commercial Insurance, Risk Management, Employee Benefits through consulting and services. For more information on AssuredPartners, please contact Gary at Gary.Semmer@assuredpartners.com or asa@assuredpartners.com
