The global shutdown caused by the COVID-19 pandemic has disrupted the production of construction materials such as steel, wood and appliances, which has severely disrupted global supply chains over the past 18-24 months.
More than 90 percent of builders reported material shortage last year, the most common shortage since the National Association of Home Builders (NAHB) began identifying the shortage in the 1990s.
Contractors pay high prices for construction materials and experience significant project delays. According to the Associated Builders and Contractors (ABC), building materials prices rose 17.4% in July 2022 compared to the same month in 2021. Not being able to find suitable or cheap materials for small business entrepreneurs who are already struggling to make a profit is a challenge. However, with prices down 1.8% in July compared to June 2022, there are hopeful signs that supply chain issues are easing. The windows cannot be used for 6 months, otherwise the construction project may be damaged by factors such as wind and rain. Did it finish on schedule? Other impacts, such as construction site accidents or worker injuries, may occur more frequently when contractors operate under manpower or employ unskilled or inadequately trained workers.
Since Builders Risk Insurance policies are directly related to wages and gross income, insurance premiums have risen due to increases in construction costs and wages. Natural disasters have shrunk the housing market, and developers in some areas are looking at single-digit rate hikes or higher. It is the agent’s responsibility to help contract clients manage and mitigate other risks that increase insurance costs.
Brokers should also look for insurance partners with experience in the contractor/construction industry. There is a traffic light at the end of the tunnel for that section. Inflation appears to be slowing and demand for new construction remains strong given the current massive housing shortage. With the help of a trusted agent advisor, entrepreneurs can alleviate current problems.
Of course, each of these individual issues are interconnected and create additional risks and insurance costs for the insured, for the polices like – Builders Risk / Course of Construction, Dwelling Fire, Contractors General Liability and Premises Liability.
Agents must ensure that customers are aware and prepared for current issues and must take steps to avoid potential claims for injuries resulting from employee negligence, property damage, or lack of material and/or labor. The contractor must disclose to the client how these issues may affect the project, increase costs or cause delays. The contractor should also consider the start time of the project. For example, if a material such as a window is not available for 6 months, can the building be damaged by factors such as wind and rain if the building is not completed in time? Other impacts, such as site accidents or worker injuries, may be more common when contractors operate understaffed or employ unskilled or inadequately trained workers. Because contractor insurance premiums are directly related to wages and gross income, insurance premiums have become more expensive due to rising construction costs and wages. Natural disasters have shrunk the housing market, and developers in some areas are looking at single-digit rate hikes or higher. It is the agent’s responsibility to help contract clients manage and mitigate other risks that increase insurance costs. Brokers should also look for insurance partners with experience in the contractor/construction industry. There is a traffic light at the end of the tunnel for that section. Inflation appears to be slowing and, given the current massive housing shortage, there is still high demand for new construction. With the help of a trusted consulting agent, entrepreneurs can meet current needs.
