The high-risk intersection of skill level and safe operations istraditionally a “proceed-with-caution” zone in the constructionindustry. It presents the greatest peril when owners andcontractors are pressed to hire earnest but unskilled workers tobridge the gap between the current workforce and the staffinglevels they need to meet demand.

Before hurricanes Harvey, Irma and Maria and the wildfires inCalifornia, put-in-place construction was forecast to make 2018another expansion year for U.S. residential, commercial andindustrial markets. A shortage of skilled workers was projected tocontinue into 2018 and beyond. Now, the huge demand for residentialconstruction work after the devastation of the hurricanes andwildfires only compounds the demand for laborers to complete thework ahead.

Opportunities for insurers

All of this building activity underscores the many risksconstruction operations face: insuring the property itself, workersafety, various forms of liability and a challenging regulatoryenvironment. Add the difficulty in obtaining coverage levelsdesired for large projects, and it all leads to an environment inwhich construction insurers must work hard to provide clients withthe coverage they want and need. Insurers also have an opportunityto go further — to bolster clients’ programs in the fundamental andever-critical area of safety management by designing supportservices that help construction firms become safer companies.

As of the third quarter of 2017, unemployment in theconstruction sector was close to that for the general population,and there are no labor pipelines waiting to be tapped. It may bethat the balancing act between competing forces — increased demandversus increased materials cost, labor versus interest cost — couldcap demand within a manageable level. If an imbalance gives theadvantage to demand, bringing greater numbers of unskilled andinexperienced workers to jobsites will likely lead to higherworkers’ compensation claims as well as increased potential forliability losses.

Related: Risk management and contracting after HurricaneIrma

Where are the workers?

Indeed, owners and contractors in the current market find theirhuman resources stretched beyond capacity even as they undertakemore development projects. There aren’t enough constructionworkers, and many of those available are inexperienced. During therecession of 2008, more than 1.5 million workers left the industry.Many did not return, and their ranks were not replenished with newworkers. Among skilled workers who continued constructionemployment, many are baby boomers now at retirement age. Thisincreases pressure not only to find replacement labor but also tomanage workers’ compensation injury exposure.

In its most recent employment projections, the U.S. Bureau ofLabor Statistics projects the construction industry will add closeto 800,000 jobs by 2024. Many who fill those positions will beuntrained and unskilled. It is imperative that they have thebenefit of thorough, effective training and ongoing health andsafety programs. These areas are where the value of aninvolved insurance carrier partner can help drive positiveimpact.

A recent industry study identified the following top factorsthat encourage companies to adopt safety practices: worker healthand safety concerns, liability concerns and insurance costs.Responding companies indicated that seeking to reduce insurancerates is by far the most important reason they continue to investin safety management.

Related: A safe workplace: The 'secret weapon' for hiringand keeping employees

(Training tailored to the different jobs in an organizationis an important part of a larger construction safety program.Photo: iStock)

Expanded opportunity

Insurers have an opportunity and an obligation to developservices or augment existing ones that encourage and assist inmaking construction firms and their employees healthier and safer.The need will become especially acute as companies hire increasingnumbers of inexperienced workers and take on more projects withless-than-ideal worker staffing levels.

Construction firms have indicated significant interest inemploying greater use of technology tools to train workers. Thereare basics, like looking for operational areas where they canimplement situational proactive measures to reduce reactive andoften hazardous responses by workers. They also want continuedprogress in automating production processes as well as integratingstandards for quality, environmental and safety management systems.These are areas in which insurers can provide help througheffective loss-control consulting.

Collaboration by all key parties is becoming more widelyacknowledged as important to the efficiency and overall success ofconstruction projects. Insurers can deliver new or enhancedvalue-added services by collaborating on safety management withowners, general contractors and trade contractors to tailorprograms to their distinct needs. From an overarching perspective,it’s necessary to identify specific needs of individual contractorsas well as major projects and customize services accordingly.

Related: Was the insurer liable for these constructiondefects?

Reach out to trade contractors

Not all clients, of course, welcome consultation from outsidethe circle of construction professionals. It is important,nevertheless, for insurers to continue to strive towards makinginroads as trusted partners. From a practice program perspective,as a group trade contractors, more than general contractors, tendto acknowledge that improved project safety is a benefit of workingwith experts outside their industry. A primary driver is that whilegeneral contractors, and sometimes project owners, carry the bulkof the liability exposure, trade contractors carry the directpersonal and financial cost of any injuries related to their staff.Naturally, this varies by jurisdiction and can be dependent uponthe specific anti-indemnity statutes governing the work.

Current challenges keep the construction industryfront-and-center as business and government manage the rebuildingafter recent catastrophes. An adjunct to this are efforts focusedon reducing catastrophic losses in the future. As businessopportunities boom for construction firms and their suppliers, theeconomy should benefit.

Related: Are courts narrowing access to coverage in theconstruction industry?

In order for contractors to prosper, repairs to the country’sinfrastructure, the repair or replacement of recently damaged ordestroyed residences, and the reinvention of future developmentmust embed efforts to reduce contracting risk, which also willimprove the construction component of the economy.

Health and safety management services as part of the insuranceoffering should become a value-add that construction clients counton as a tool to enhance the productivity and profitability of theirfirms.

Related: Construction could be the next target for cyberthreats

Andrew Murray, CIC, CRM, CRIS, is chief underwriting officerand assistant vice president for the Primary Construction divisionwithin STARR Companies, a global insurance and investmentfirm.