COVID-19 Construction Risk
The effect of the COVID-19 pandemic on the U.S. construction industry is certainly unique, and there is no one-size-fits-all impact.
Some construction firms are status quo — working as normal and not feeling much of an effect other than potential business continuity or employee safety concerns.
On the flip side, however, we’ve seen firms who’ve had a significant drop in their volume of work, having to go so far as to close their operations for the time being and laying off or furloughing employees. Reasons certainly vary by firm and may be due to not having adequate staffing, business decisions to protect employees, fear of not getting paid, owner decisions, and/or the impact of state governmental declarations on what is considered an essential business.
COVID-19 Construction Insurance Market Conditions
Regardless of the different firm impacts, the insurance market conditions we’ve been experiencing have not changed with COVID-19.
We continue to see insurance carrier attachment points on the excess/umbrella liability policies increasing, underlying limit requirement increasing, and markets dropping out of certain types of risks. We’ve also witnessed a continuation of dramatic price increases in some of our standard lines of insurance, such as property, builders’ risk, automobile liability, umbrella, and excess liability lines. April 1, 2020, placements were particularly rough for many contractors.
Underwriter COVID-19 Requests
What we have seen that’s different, though, is underwriters inquiring about pandemic-related questions and, in some cases, requiring the completion of a COVID-19 supplemental questionnaire.
Much of the questions, as expected, center on risk management processes as they relate to keeping employees safe:
- such as knowing CDC and OSHA COVID-19 recommendations
- whether or not they have an infectious disease preparedness and response plan
- if they’ve trained for it
- what kind of PPE they use
- whether they have a plan to address business interruption for labor, supply, or delivery due to the situation
- what kind of risk management planning they’ve conducted to shift work or reduce workforces
Insurance Agent and Broker Diligence Needed
These are all great questions; however, what’s somewhat confusing is how the underwriting community is using such questions. We believe diligence is needed by insurance agents and insurance brokers to inquire about whether these questions are appropriate based on the exposure of the construction firm.
It seems reactionary, much like the scramble to make sure virus, communicable disease organic pathogen, and pandemic exclusions are included on many lines of coverages, some of which are broad enough to make you wonder why they are being added to a construction firm’s policy.
It’s tough to ignore the fact the insurance industry is dealing with potential losses and fallout from specialty programs having generous coverage grants. Additionally, specific state-proposed legislation mandating COVID-19 insurance-related losses be paid for certain size risks where coverage would not have existed before could be a struggle. Oh, and let’s not forget the negative impact on investment income.
Construction Insurance Market Future
Today, there are too many unknowns to predict what the insurance market will look like post COVID-19, but I think it’s safe to say the landscape of the market will change. Carriers will come and go; coverage terms, conditions, and limits will see amendments (some may be mandated by reinsurance); limits may tighten even more; and there may be a continuation of pressure on rates.
What isn’t unknown is that we will be here for you. That is 100 percent guaranteed. Speaking of which, don’t hesitate to reach out to us or visit CSDZ’s COVID-19 Resource Center (updated daily with the latest information) if you have any questions. We’re working hard to ensure we’re providing you with resources that matter!