The nuts and bolts of the construction insurance industry can be complex – and as a result, it can be one of the trickiest sectors to staff, says an expert.
Denis Dei Cont, senior vice president and COO of Totten Insurance Group says that while fielding new talent is a challenge for insurance as a whole, a dwindling workforce is especially felt on construction zones.
“I think sometimes the construction industry takes more training, so it takes longer to prepare somebody to do a good job,” he says. “It’s more complex than underwriting a store pack and it’s same with the wrapup product – you have to understand what is going on with the project, what the requirements are.”
And fledgling brokers looking to break into the construction space will be put to the test, as the requirements for the space are constantly changing, from ever-evolving products, to underwriting entirely new risks as materials and practices change.
“The principal challenge, given the speed of change in the construction world, is staying current,” says Dei Cont, pointing to the recent approval of six-storey wood frame projects as an example. “That’s something new to Canada, and I’m not sure the marketplace is ready for it – you have to ask, ‘how would this work, what kind of material do they use?’
“There’s always something new. It’s always a constant struggle to stay on top of new construction techniques and new design.”
He adds that as the construction industry expands, so too do the associated coverages. “Coverage is getting broader and broader,” he says. “The current policies have all the extensions of a CGL.”
Elements such as environmental coverage, design error and employee benefits liability are among the coverages now commonly featured in a wrapup. “Sometimes you wonder why they’re there,” says Dei Cont. “Maybe a consultant was looking for a broader wording? You have to ask - does it really apply? Does it create a hornet’s nest in comparison with the contract with general liability?”
He adds that construction insurance can also be challenging from a profit perspective due to “excessive capacity” and a competitive marketplace.
“We have overcapacity, but when you look at that line of business in general, the fact that 50% of our losses are water damage itself, I think as a line of business it’s very difficult to make money,” he says.
“The industry is going to change as capacity changes, it’s just a function of how many dollars are available, and as soon as somebody can’t buy reinsurance or their capacity is restricted in some way, shape or form, because of the class of business, then you’ll see some pressure on pricing. But beyond that, Canada continues to be a very attractive place to do business.”
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