Insurance rates are rising rapidly for contractors, particularly for builder’s risk and excess liability policies as the cost of claims continues to increase dramatically.
Both lines of insurance have seen steep and unexpected losses in recent years, resulting in some insurers leaving the market and others becoming stricter in their underwriting and choosier about which builders they are willing to extend coverage to.
If you’ve been in the market for these lines of insurance, you know that it’s become more difficult to secure similar policies to those you may have had in years past. Here’s a look at what’s going on.
According to Construction Executive magazine, rates are going up between 10% and 20% for builder’s risk policies. There are a number of factors affecting rates:
- The cost of claims has increased, primarily because of the cost of rebuilding after a loss event due to rapidly rising costs of materials, in particular lumber, the prices of which have tripled in the last year.
- The increasing cost and frequency of natural disasters. Projects that are near areas at high risk for natural catastrophes like brush fires, hurricanes, tornadoes or flooding, are all seeing higher rates and/or difficulty in securing coverage.
- Some insurers have also left the market, leaving fewer players willing to write this risk, which has driven up pricing.
Insurers are tightening eligibility guidelines and restricting how much they will cover. Some companies are getting more selective and demanding that their insureds take extra precautions before they are willing to bind a policy. Some of the more common demands include requiring:
- Video surveillance systems on worksites.
- Guards to patrol worksites at night.
- The installation of fencing and lighting.
One of the biggest pinch points is policy extensions, which are needed when projects go beyond the time expected to complete them.
Due to the issues mentioned in the bullet points above, policy extensions for ongoing projects have been difficult to secure, according to a report by Willis Towers Watson.
The problem has been exacerbated by the COVID-19 pandemic, which disrupted many construction projects across the country and required more companies to seek out extensions for their builder’s risk policies.
Renewals for excess liability and umbrella insurance have been running 50 to 100% higher than in 2020, according to a recent report by Marsh LLC. Excess liability and umbrella coverage kicks in after a claim breaches the limits of a primary general liability policy or auto liability.
The driver: Increasingly large jury awards and the spiraling cost of liability claims, particularly for commercial vehicle accidents. Juries are being more generous with awards and many cases never reach trial but end up costing builders and their contractors when they settle out of court.
Those settlements are covered by general liability insurers, and excess carriers cover the rest if the settlement or award breaches the primary policy limits.
Like in the builder’s risk segment, this has resulted in fewer insurers willing to write new polices. Those that are willing to write new business or renew polices have imposed stricter underwriting terms on the policies they are prepared to accept.
Additionally, according to Marsh, primary and excess insurers are limiting the overall capacity extended to an individual buyer by capping per-project aggregate limits.
With the volatility in the marketplace, we recommend that you reach out to us early ― and months before your policy is coming up for renewal ― so we can work with you to make sure we can secure the coverage you need.
BGES Group’s office, located in Larchmont, NY is a full service insurance agency offering, Property, Liability, Umbrella Liability, Business Auto, Bid & Performance Bonds, Inland Marine, Worker’s Compensation, New York State Disability, Group Health, Life insurance, Personal lines and Identity Theft.
Special Contractor Insurance Programs (NY, NJ, CT) – We we have 50+ insurance companies to market your general liability, umbrella liability, business auto, workers compensation, bid & performance bonds and group health coverages. We help contractors set up proper risk transfer. If you’re a contractor we offer extensive information about insurance markets, coverages, risk transfer, subcontractor screening, ways to lower your insurance costs.
BGES Group are Worker’s Compensation Specialists for the States of New York, New Jersey and Connecticut – Issues we address: 1) Lowering pricing – we have specialty programs that can save you up to 40%; 2) Finding a new company; 3) Replacing policies that are being cancelled or non renewed; 4) Audit disputes; 5) Company creating fictitious payroll at audit time; 6) Lowering high experience modifications factors; 7) Misclassification of payrolls; 8) Lowering or eliminating renewal deposits; 9) Getting coverage when you’ve been without for a few months; 10) Covering multiple states under one policy; 11) Eliminating 10% service or policy fees; 12) Timely issuance of certificates; 13) Always being able to get someone on the phone or by email when you need to.
Company: BGES Group, 216A Larchmont Acres West, Larchmont, NY 10538
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