The insurance market has failed to keep pace with the construction sector – it’s time to improve collaboration. Check this report from Constructing Excellence (CE) for what you need to do.

Key players in the construction sector recently met with leading construction insurers to discuss current trends and debate the future outlook for their industries. The meeting of minds was organised following a discussion between Lucas Fettes & Partners and Constructing Excellence, CEW’s sister organisation that is charged with driving the change agenda in construction in the rest of the UK.

In light of the rapid changes in the construction sector, CE wished to explore with insurers the way in which new insurance models could be created to better align the interests of both the insurance and the construction industry and enable innovative and more efficient funding frameworks in a way that would reduce risk and encourage more collaborative working.

As the construction sector changes, insurers are finding that their traditional products and underwriting techniques are in danger of becoming outmoded. Whilst many acknowledge the need to change, acting on it is a huge challenge, and the development of new approaches can only happen if there is effective collaboration between clients, investors, contractors and the insurance industry.

The report from the workshop that was set up is enlightening and CEW thoroughly recommends you download it and check out the links and watch the video. Here is the main link and please watch these videos as well.

We have produced a video: Where will the construction insurance market be in 5 years’ time? A dialogue that is long overdue.

Key insights from the discussion include:

• On any given project there are multiple insurers underwriting the same risk, resulting in significant over-insurance and driving behavioural norms towards a litigious rather than collaborative approach. Projects too often seem to be to be set up for a win-lose scenario. True collaboration can only come from the alignment of each party’s commercial needs.
• An insurance product that caps out-turn costs could take away the potential for conflict by looking at how much can be priced in, instead of out, of cover. Again, success requires a shared commercial interest.
• Connectivity and the Internet of Things may bring about an insurance product that extends beyond the build project and into the operational lifecycle of the building. “If you can understand how a building is going to age, then it is possible to model.”
• BIM creates the availability of tools to provide information – management information is readily accessible on a tablet or in app form. Will that drive different lending behaviours or create different types of lenders? New technological underwriting techniques will be a major disruptor, making it possible to bypass traditional means of insurance.
• Technology is only ever an enabler. The maturity and competency of the client is critical. What is their track record? Do they have the right leadership? How much do they care? Just how invested are they in the project? Businesses that derive the most value will be those that invest in building BIM into their transformational programmes, such as health and safety and HR.
• Data now is far more valuable than the physical assets that underlie it. Competitive advantage does not come from holding on to your own data, but from sharing and pooling data, then competing on the ability to analyse and get value from it.
• Underwriters must have a joint seat at the table with a client. Brokers have traditionally enjoyed being able to control the relationship but, now, a good broker will allow the insurer to get in front of the client.

https://www.youtube.com/watch?v=8O09Tc0vzVI