6 Ways Construction Technology Can Lower Insurance Premiums

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Reducing Project Risk with the Right Tech

Construction is a high-risk industry. In addition to workplace safety concerns, construction firms must also grapple with client disputes and miscommunications. The global average value of construction disputes was $30.7 million, according to Arcadis’ 2020 Global Construction Disputes Report
.

Disputes cause a number of disruptions during construction projects. Depending on the nature of the dispute and how it is handled, the result might be project delays, broken contracts and even litigation.

Good construction insurance can protect firms from the dire consequences of client disputes, but sometimes premiums can be prohibitively expensive. For smaller construction companies working on tight margins, high premiums can stand in the way of company growth.

A typical insurance premium may cost between 1 and 4%
of the total cost of construction for a project. In a tight market, where contractors are competitive with one another, the higher-cost premiums can put some firms out of business or force others to make poor decisions about using lower quality insurance.

Premium costs are based, in part, on claim history. Therefore, reducing the number of claims made on the insurance policy helps keep the premiums low and puts more money back in the hands of the contractor. Contractors seeking lower premiums must systematically reduce their risk and back up their actions with the right documentation. To do this, it’s essential to have the right technology. With the right systems and software, construction firm owners create a safer culture for workers on projects.

Software can also be used to create more effective communication processes between workers and management. Fewer miscommunications and accidents can lead to a reduction in construction insurance claims.

So, how can the right technology have such a big impact on a contractor’s insurance premium?Let’s explore six major risks that construction software helps to reduce.

6 Risks Mitigated with Construction Software

What are the significant risks that can be alleviated with the right technology? Here are six that can be mitigated today with the help of the right mobile construction software.

1. Defect

A construction defect
can be a costly claim that could require additional work and money to fix. In some cases, defects can even cause harm to a contractor or a member of the general public.

Some defects occur because of a problem with the manufacturer’s product, while other defects arise because of failure to perform a repair or remodel properly. Defects also happen as a result of mistakes or errors in the planning and design stages.

Technology reduces the risk of a defect happening due to a failure to perform a repair or remodel properly. By arming contractors with better data and access to the information they need, construction teams are able to avoid the mistakes that would lead to injuries and claims.

Technology can also reduce the time it takes to resolve or litigate defects, by providing the right documentation.For instance, tools like Autodesk Build and BIM 360 helps teams better track all asset related information organized in a central location. Teams can quickly access relevant documents, flag and respond to defects, and initiate faster inspections and testing.  

2. Subcontractor Default

When subcontractors are unable to perform on a project, contractors are sometimes held responsible for the resulting loss of time or materials–known as subcontractor default. 

Subcontractors default when they take on too much work or payments from other projects have been delayed. Vetting and hiring quality subcontractors with prequalification tools
like TradeTapp
is essential for reducing subcontractor default. Both brokers and carriers in the construction insurance industry, such as McGriff Seibels & Williams and AXA XL, have endorsed TradeTapp and its ability to minimize risk
by subsidising access to the application for their Subcontractor Default Insurance customers. 

3. Claims Discovery Delay

Contractors are responsible for their work
, even long after the project wraps up. If a defect is discovered months after the contractor last sets foot on the jobsite, that contractor is still liable for the damage the error caused.

In the past, contractors found it difficult to defend themselves or clarify their actions when a problem occurred. Software that improves documentation and provides all information accurately could help the contractor avoid litigation.

For contractors, the Assets module in Autodesk Build and BIM 360 offers the ability to align project assets to the model, ensuring all teams have up-to-date information, and also provides a digital trail of what issues have been resolved during installation. These new capabilities also help minimize future risk and litigation by tying a historical record to each asset.

4. Property Damage

Occasionally, contractors cause damage to the property they are remodeling or improving. Once again, thorough documentation through construction software can help reduce this risk.

If the damage is not the contractor’s fault, documentation can sometimes prove this to those who would turn to the contractor for answers. Alternatively, software can sometimes help ensure that damage is not created in the first place.

By giving teams the correct information when building begins, cloud-based software can prevent contractors from making the mistakes that would lead to this property damage. 

5. Contract Compliance

Due to rework and coordination issues, the majority of projects experience some degree of schedule and cost overrun. With the enormous scope of work and level of detail necessary on projects, it’s easy for one small thing to slip through the cracks—especially with scope creep from change orders and spec updates. The resulting ballooning schedules and costs can cause disputes and litigation between property owners and their contractors. 

Insurance leader Aon
recommends Pype to help address contract compliance by ensuring accuracy and fostering clarity of scope throughout the entire project lifecycle. For instance, Pype AI
, included in AutoSpecs, applies the experience from millions of projects to search your specs for missing requirements. These flagged requirements provide you with the information you need to discuss their impact on the budget, scope, or timeline with your client before it turns to litigation.

Connected construction software
that bridges the office and field teams also can ensure contract compliance. By creating a collaborative environment and enabling information sharing between all project stakeholders, software ensures that rework and coordination issues are much less likely to arise. Overall, the right solution helps mitigate job costs and helps ensure the smooth completion of each project.

6. Safety Risks

Safety issues and incidents can raise your insurance costs. Insurance firm’s use your experience modification rating (EMR) to calculate your premium for workers comp coverage. With a good safety record and lower EMR, your firm will pay less in premiums. 

A strong safety culture and qualified subcontractors are foundational for reducing overall safety risks and issues. Technology can further solidify the success of safety programs and new innovations can even proactively reduce risk. For instance, machine learning technology, like Construction IQ in the Autodesk Construction Cloud platform, is an emerging way that firms are identifying and managing risks. Construction IQ scans project data and identifies high-risk areas that impact design, quality, safety, or project controls.

The machine learning capabilities in Construction IQ can be used with partner integrations like Smartvid.io
to identify safety risks. This data can be sorted and viewed by location, and help contractors gain valuable insights into subcontractor safety practices, target recurring hazards, and prioritize projects or business units that need particular attention. 

Reduce Insurance Costs with the Right Software

Many different types of construction software can help reduce project risk. Often, the best software can reduce your firm’s chances for an accident or a miscommunication by enhancing collaboration and documentation.

Autodesk Construction Cloud allows contractors to mitigate their risk and improve project outcomes through reduced defects, enhanced digital documentation, and improved access to data from construction to operations. Learn more here

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Originally posted at: https://constructionblog.autodesk.com/lower-construction-insurance-cost/

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Originally posted at AnalyticsWeek