Construction After COVID Q&A: What Agents Can Expect to Insure

Construction | Aug 17, 2020

Can you name an industry where COVID-19 hasn’t left a mark? That’s a response we need a minute to answer. What we do know is that it’s altering the construction industry — from permitting to build and remodel designs, to labor, materials and builders risk insurance.

What does that mean for property and casualty insurance professionals? Let’s ask an expert!

US Assure President Alan Ferguson sat down to offer his perspective on the state of the construction industry, how COVID-19 has changed things, and what types of projects commercial and personal lines professionals can expect to insure moving forward.

Q: What’s new in the construction industry?

A: Essentially, what we’ve been seeing is a little bit of change around how people are living and working in this new post-COVID environment. We’ve seen design changes that are really gearing up to get houses ready for a work-from-home or even a learn-from-home environment. I think you’re going to see a lot of accommodations change in the way homes are designed and constructed to allow for more modular space, combined-use space, even design elements that were previously fixed in place like a kitchen cabinet or island might now be on wheels. Perhaps even with convertible tops that can be used for desks, things like that. I think the use of a space within a home can be more efficient. Almost think in terms of the space of a motor home or RV, where the space can be easily reconfigured for the task at hand.

Q: How has COVID-19 affected the industry?

A: Well, it’s had a significant impact. The largest around projects that were ongoing before this happened. The pace of construction has slowed significantly. Partly driven by mandated closures in certain states and jurisdictions. In many parts of the country, we’re seeing limitations on the number of subcontractors allowed on the jobsite. As an example, in a typical homebuilding project, you might have a plumbing contractor, framing contractor and an electrician all there on the job in the same day. Now, if the plumbers are there, nobody else can be on that particular job. Even in some instances, they’re abiding by specific rules that say, for instance, two people can be inside the structure, one outside the structure and one in the truck.

Q: How about new projects?

A: That process has slowed as well. It’s really having to do with architects and engineers since they’re being saddled with a work-from-home environment. Using CAD and other engineering programs, it’s very difficult to have all those folks online remotely, so those offices are often working with 25 percent of employees in the office and the rest from another location. The pile of work is stacking up, which slows down the permitting process and the start of construction. And all that goes hand in hand with inspections.

Q: How so?

A: A lot of jurisdictions are not allowing inspectors out on job sites if the homes are occupied, commercial structures are occupied, or not allowing them out at all. Certain municipalities won’t allow folks to come in to pull a permit, and they can’t have it done remotely because there’s no system in place yet. So that’s something that’s a little bit unique and has slowed us down.

Q: Any other changes you’re seeing?

A: The other really significant thing we’re seeing is a shortage of building materials. A lot of folks are getting involved in the DIY world. So your typical big box supply stores are experiencing a shortage of things like framing materials, sheeting, and so on.

One positive thing is that public works projects are taking off at a much more rapid rate. Traffic slowing down means the street and road projects can work 20 hours each day instead of 10, because worker safety is less of a concern in lighter traffic. So, there definitely have been some positive impacts.

Q: Can you tell us more about what’s going on in the insurance space?

A: The capacity to write frame has slowly begun to be removed from the market. Lots of carriers are hardening their pricing stance on that, if not their eligibility guidelines, and many are seeking quota-share partners to accomplish that. So, that’s one of the major areas we’ve seen leading into this pandemic.

On the commercial side, we’re starting to see some changes in coverage requests. There’s a lot of dialogue in the market around contingent liability. Typically, these coverages are provided through the liability product. However, certain providers such as US Assure and Zurich are adding endorsements to their builders risk policy to allow for some limited liability coverage for damage caused to the structure adjacent to the one we’re insuring. It’s really more designed for those nuisance type claims and not necessarily to provide a true liability cover for those projects.

Q: Any specific changes US Assure is experiencing?

A: We’ve had some changes around technology. We’ve launched a new product called XPressBIND, which is a brand new application that allows us to provide an agent a bind-able quote for their insured by answering six triage questions and giving us an address. It’s a very simple, updated system that is really a game-changer in how folks go out and price residential builders risk in the market moving forward.

Q: Is there anything else you’d like to share with us about the insurance and construction marketplace?

A: For us, it’s really the “what’s next” in all this. Everybody’s gone through this massive transition to work from home. We sent 100 folks home at lunchtime on Monday, March 16. How we work and where we work is going to change significantly in our daily lives.

Q: So, how do you anticipate those things changing?

A: Not only will home design change as we discussed earlier, but also those commercial structures. There is, quite possibly, going to be an excess in certain parts of the country where commercial real estate sits empty. How those buildings are re-purposed is really going to be the next trend we’ll see from a construction and remodeling standpoint.

Q: What kind of construction changes can you foresee?

A: The unique thing to this is that those entities that go back to work in brick-and-mortar locations, to these pre-COVID norms everybody was used to, how they work will change as well. I think you’ll see less open collaborative space, you’ll see fewer low-walled cubicles, you’ll see fewer open areas and more transition to more square feet per person, offices with doors, back to an environment where people feel more comfortable based on what we’ve learned around social distancing, interacting with folks, traffic patterns around the office are going to change. All those things will impact not only how we live and work, but also what kind of construction agents could be looking to insure.

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This is intended as a general description of certain types of insurance and services available to qualified customers. Your policy is the contract that specifically and fully describes your coverage. The description of the policy provisions gives a broad overview of coverages and does not revise or amend the policy.

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