As the year draws to a close, a look back at the commercial construction industry’s achievements and milestones are discussed by Jim Albi, assistant vice president-contractors segment leader at Selective Insurance. Below is a Q&A with insights into the technological advancements in the industry, how challenges were overcome, and what trends were most disruptive.
MCS: What were the major achievements and milestones in the commercial construction industry over the past year, and how have they contributed to the sector’s growth and development?
ALBI: Contractors’ ability to complete projects despite the economic and labor challenges of the past year is a testament to their resiliency.
Over the past few years, new technologies focused on worker safety has helped push the industry forward. We have observed more “middle market,” and smaller construction firms consider using these technologies. We’ve also seen them partner with their insurance carriers to expand their focus to include new value-added solutions. For example, for many years, Selective Insurance has offered sample subcontractor templates to assist contractors manage their risk when hiring subcontractors. Recently, we coupled these templates with technology by providing them in a customizable manner through our Selective Mobile App, supported by the DocuSign Platform.
MCS: How has the commercial construction industry evolved in terms of technological advancements and innovative construction methods during the past year, and what impact have these changes had on project efficiency and quality?
ALBI: As new technology is tested, used, and proven, adoption will become an industry standard. Many contractors are trying to offset inflationary pressures and worker scarcity by increasing technology use for traditionally manual activities. Examples include using robots for materials handling, video monitoring of jobsites, and using mobile apps to perform project management and documentation tasks with fewer employees.
Earlier this year, Selective introduced TuMeke Ergonomics’ risk assessment tool to its workers’ compensation policyholders. The tool uses AI to identify body positions and motions that may strain muscles, nerves, and tendons, leading to worker injuries and costly workers’ compensation claims. This new technology is already seeing results, and one user saw a 68% decrease in recorded Musculoskeletal Disorder injuries within six months of deploying the tool.
MCS: What were the key challenges and obstacles faced by the commercial construction industry in the past year with respect to managing risk, and how did businesses and professionals overcome them?
ALBI: Labor, inflation, and economic headwinds have impacted many industries, including construction. General contractors responded to the economic risk in various ways, including focusing on the renovation market as new construction projects became scarce, taking out lines of credit to pay for labor and materials, and hiring more independent contractors to reduce employee overhead costs.
In particular, the skilled labor shortage presents the longest-term obstacle for the industry. To compensate, contractors have hired less experienced workers and increased how frequently they use other contractors and subcontractors to help them complete projects on time. To attract and retain workers, contractors have offered higher salaries, signing bonuses, and payment for skill certifications if employees remain with them for specified time periods.
Another challenge contractors face is the risk of property loss during construction from natural catastrophes, theft, explosions, and building system failures in foundations, scaffolding, and fencing. We have recently observed an uptick in two types of builders’ risk claims: fires from hot work—tasks like welding and brazing—and spontaneous combustion of oily rags and sawdust after disposal in plastic bags or trash cans. These are risks that contractors should pay particular attention to heading into 2024.
MCS: What predicted trends in 2024 proved to be disruptive and move the construction industry forward?
ALBI: As we look ahead to 2024, I echo many of my prior points about the increased prevalence of technology as part of contractor workplace safety. We will see a continued increase in the use of technology across every aspect of construction operations, from the jobsite to the back office. We expect broader applications of technologies like wearables, robots, remote monitoring, building information modeling software, and virtual—and augmented-reality tools for training.
We also anticipate that more contractors will use in-vehicle technologies like telematics, dashcams, and driver-assist features to reduce their automobile risk exposure. As vehicles increasingly incorporate technology, associated repair costs have risen dramatically, leading to a rise in claim payouts and premiums.
Additionally, the actions by the Federal Reserve on interest rates will remain at the top of the list of concerns as a potential disrupter for the construction industry. Not only can higher interest rates put a damper on residential home building, but lower rates can help the affordability of loans needed by developers for all types of projects.
Stemming from supply chain shortages and high demand, general contractors will try to work around uncertainties in construction timelines by using alternative and/or recycled building materials such as 3D printed materials, shredded tires, reclaimed soil, recycled plastic, and used bricks. In the year ahead, contractors should still plan for supply-chain risks and find additional suppliers or stockpile materials. Increased demand for particular alternative materials also may lead to supply bottlenecks.
CLOSING THOUGHT
The construction industry is ripe for rapid evolution and change over the next 3-5 years. Creating a robust risk management program will be paramount to general contractors’ success. One core step in managing risk is to partner with an insurance company that specializes in construction risks, understands the complexities facing contractors, and can provide them with the resources they need to help manage their business.
For More Information:
Jim Albi is assistant vice president-contractors segment leader at Selective Insurance.
Modern Contractor Solutions, December 2023
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