This Partner Perspective is part of a series brought to you by Liberty Mutual
The construction insurance market offers significant opportunities, but it also faces new challenges, particularly legal system abuse and the high casualty nature of construction risks.
Scott Lombardi, Executive Vice President and Chief Product Officer for Small Commercial at Liberty Mutual, emphasizes the importance of understanding contractors' specific activities, work consistency, business locations, and subcontractor relationships for success in the construction market.
Biggest Shift in Small Commercial Construction
The most notable shift is the rise of legal system abuse, where plaintiff attorneys and third-party litigation financiers exploit the legal process for financial gains, leading to higher claim costs and settlements than historical loss experience indicates. This trend is more prevalent in construction due to its heavy reliance on casualty coverage, including general liability, umbrella, and commercial auto policies.
Liberty Mutual's Approach to Construction Insurance
Liberty Mutual closely monitors litigation trends in the construction sector, analyzing changes in legal costs and jury verdicts over the past three years. This data-driven approach allows them to underwrite and price risks more accurately. The key is to understand that construction risks vary based on legal environments, allowing for tailored pricing and risk management.
Why Liberty Mutual Continues to Focus on Construction
Construction remains a vital part of Liberty Mutual's small commercial business, characterized by steady growth, despite recent slowdowns in the residential sector. Their refreshed quoting experience, aligned with agent and broker workflows, and their strong historical data in construction enable them to differentiate opportunities from risks.
Often Overlooked Coverages in Construction
While general liability, umbrella, and commercial auto coverages receive significant attention, contractors' equipment and inland marine coverages are frequently underestimated. Construction businesses often have equipment and property in transit between job sites, making these coverages crucial but often overlooked.
Mistakes Agents Make in Submitting Construction Risks
Agents often make the mistake of treating all construction businesses as having similar risk profiles. Liberty Mutual recommends specialists, as contractors performing the same work repeatedly tend to yield more predictable underwriting results. When submitting risks, agents should gather detailed information about the specific work, business location, and related risks to ensure accurate pricing and coverage.