When risks arise on the construction project, four balance sheets are most often affected: the contractor’s balance sheet, the insurer’s balance sheet, the design office’s balance sheet and in some cases, the master’s balance sheet. ‘work. The pain inflicted on the finances of these three entities is often done in painful, isolated silence. The contractor accounts for the impact of the loss, then the insurer, then the design company, and finally the owner.
Very rarely do these four entities stand back and combine their respective losses due to risk in order to try to understand what happened and how it could be better managed in the future. If there was better communication around the risks before, during and after the execution of the construction project, one would think that the capacity to reduce the impacts of material risks would be reduced.
In the coming years, it looks like the construction industry will not only begin to combine the collective impact of risk on the balance sheets of all major stakeholders, but will find new procurement models to collaborate more effectively and leverage the power of technology to create impacts on decision-making.
Interestingly, most in the industry overlook the impact of construction risk on an insurer’s balance sheet. Contractors, design offices and owners collectively see themselves as the main stakeholders in the management of risks and the impact of risks. Although the insurer does not play an important role in the risk management of the project, it bears a significant financial burden when the risk manifests itself on the project through its policies / guarantees that it issues for the project.
Their financial exposure to construction risk has come to the fore in recent years as insurers have seen massive increases in claims costs on almost all lines of construction coverage. As a result of these losses, insurers have let the industry know that they are not particularly happy with the results of their projects and have made it known to the construction industry by charging significantly higher premiums. Construction insurance rates have risen steadily over the past four years.
This is a global phenomenon and the construction industry is starting to pay attention to it and look for new avenues which they hope will result in better risk allocation and management.
With a more influential seat at the table, the insurance industry is using its claims data to help the construction community better understand the total cost of construction risk. Additionally, insurers are eager to find ways to work collaboratively with industry to improve risk outcomes for all players in construction. Progressive construction insurers are starting to recognize that they need to take some of the premiums they collect and invest it to help the industry manage risk better – with better risk management, insurers will perform better subscription.
Now is the time for the insurance industry to stop spending money on claims and legal fees associated with claims litigation, and start working with all construction stakeholders to prevent and mitigate claims. covered by the policies they issue. On this front, there is probably no greater investment opportunity for insurers than the growing power of the Internet of Things (IoT) installed on the construction project (and installed further on the asset of post-construction operation).
The IoT universe of the building and construction environment is huge and continues to grow at a rapid rate. If there isn’t an IoT solution for a particular risk, there will be. The following is a brief overview of some of the more impactful IoT risk categories:
- IoT Water Mitigation – Water sensors, pressure sensors and automatic shutoff valves.
- Environmental IoT – Temperature, humidity, air quality, number of particles.
- IoT Workplace Accidents – wearable technologies, asset tracking sensors, computer vision solutions.
- Site-specific weather IoT – dedicated weather stations and weather forecasting algorithms that provide accurate weather data.
- Fire IoT – detection and mitigation technology to prevent fire hazards.
- Concrete integrity and IoT monitoring – tools to monitor concrete cure and quality.
- IoT Structural Integrity – IoT structural monitoring and digital scanning solutions.
- IoT Supply Chain & Materials Tracking – Track timing and quality of goods in transit, Track subcontractor and supplier performance, Track logistics industry.
NOTE: All of the above IoT categories also have significant productivity impacts and should be considered when measuring the total impact of these solutions. These are just a few of the IoT categories that are already showing delta risk mitigation impacts of up to 95%. With more investment from all construction players in the world of IoT solutions, more data will be made available to identify the most impactful IoT categories and companies. Insurers need to realize that this new seat at the project risk control table needs to be used to help the construction industry transform their job sites into more conscious environments (even predictive environments) and for a small investment from the company. bonus that they collect, they could have a positive impact on their future technical results!
David Bowcott is Global Director – Growth, Innovation and Insight, Global Construction and Infrastructure Group at Aon Risk Solutions. Please send your comments to [email protected]