We’ve talked before about the shortage of construction workers being a factor in that industry and the contracting industry but in the insurance industry, it’s also creating a lot of problems in some possible chronic delays in higher costs for insurance claims. This is something that hasn’t really been urgent or a crisis factor as of yet, but in the next year or two, it could be a big deal.
We’re in a unique position to see it from both sides. We’re both a licensed insurance agency and also a licensed general contractor, so we see it from both ends. And there’s a great article in the insurance industry publication about how skilled labor shortages building contractors and risk professionals need to be aware of this. They talk about a storm brewing for the construction industry. How does labor shortage affect the insurance market? And how could it be more of a problem than maybe people realize?
Well in the construction industry the problem is because according to the head of construction from the Hartford, which is a big insurance company, labor is a significant issue. Skilled labor shortages hinder the ability of construction companies to uphold contracts. So, if you are a builder, contractor, or construction company and you can’t get labor, maybe you violate your contract, and that could be an insurance claim. Right. What if you’re not a builder or construction company how does that affect your insurance? Well, if a trade doesn’t have enough workers to complete a job, you might have to subcontract it out which can raise the cost. So if you have damage to your building, if you have, you know let’s say a fire or water damage or some other structural problem, you have to hire contractors. If it’s going to take longer than what the original insurance underwriting figured that claim, it might be higher and it might raise your insurance rates in the future.
From the contractor side, when you’re bidding on a job, you have to factor in the fact that you have less labor. You can’t take on as many jobs, you have to be more selective in your bids. Meaning that bidding is more competitive and that prices are higher. Also, if you put less experienced workers onto a job site, you have more potential for claims. People getting hurt, people getting injured, or even defective construction, All of this at some point percolates back into the insurance market when they factor in claims expense and even a loss of income business interruption. So if your business is damaged or needs repair, if you have BI insurance where you’re getting payments to cover your lost income, if that job is going to take eight months versus three months, that’s five more months of lost income. That’s going to go into your claim. That’s going to raise rates in the future. And even though you’re getting paid for that lost income, you’re not going to be able to grow. That’s six months of growth that you lost and it might reverberate for years right if you’re constantly growing, adding new customers, and doing business development in your industry. If you don’t have that six months to be able to grow you’re just kind of stagnant getting the insurance payments. You’re going to be six months behind forever. And that six months can add on to itself exponentially to have losses that you can never recover from. So the labor shortage in the construction industry affects more than just general contractors. It affects insurance and even the bottom lines of businesses.
Looking for more information?
A cyber liability policy can help cover your business and keep you updated with industry tips like this one. Get in touch with us today to learn more about cyber liability insurance coverage, or set up a no-obligation consultation with a commercial lines expert through TelaClient.com.