ISC offers two distinct Contractor General Liability (GL) products: One focuses on the small contractor with a national footprint, while the other caters to larger contractors in certain geographic areas. Michael Cronin, Senior Vice President of Product Management, provides us with several insights and a market recap of the General Liability and Equipment space.
Small Contractors See a Spike in Residential Activity in Wake of the Pandemic
The pandemic shutdown in 2020 that resulted in people staying home spurred a wave of residential activity, with homeowners and investors renovating, buying, and flipping houses. Small contractors benefited from this spike in activity, as more people chose to expand and fix their existing homes, buy and renovate new homes, or invest in and upgrade homes in order to flip them in an exploding housing market.
“The increase in residential activity has been good for the small contractor,” says Michael. “It’s opened doors that didn’t exist before and enabled new start-ups to form. In years past, small contractors – electricians, carpenters, etc. – were either involved in new builds or performed the odd job. Major home renovations and house flipping has allowed small contractors to take on lucrative jobs without the full commitment of having to build entire subdivisions.”
The small commercial market has also seen an uptick in work for small contractors. For example, restaurants reconfigured their dining areas to accommodate social distancing, and drive-throughs were built for food pick-up.
Insurers Keep an Eye on Challenges for Small Contractors
While business has been booming for small contractors, they nonetheless face challenges resulting from labor shortages and supply-chain disruptions, and delays. “Getting talent with the right work experience has been challenging for contractors, as it has been in many other industries today,” explains Michael.
The ability to meet the demand for increased wages is another issue contractors face and adds to project costs. In addition, supply chain delays and rising material costs are all factors that contribute to the cost of a project.
“As insurance providers, we are keeping our eye on the impact that the talent shortage, supply chain delays, and rising costs are having on construction defect claims. As contract values rise, so do the cost of these claims, which ultimately puts pressure on rates and the premium needed to defend contractors facing liability claims and pay-claim settlements.”
Reinsurers and the U.S. Small Construction Segment
The reinsurance market continues to have a positive interest in the U.S. construction segment while also remain attentive to the impact of rising building costs, the quality of work, and increased claims costs. “We work with carriers and reinsurers in London, Europe, Bermuda, and the U.S.,” says Michael, “and while they continue to provide the financial backing necessary for us to offer cover, they, too, are attentive to rising building costs, work product, and claims costs.”
Reinsurers expect primary insurers to employ careful underwriting, implement high standards in the quality of contractors they insure, have a good understanding of each contractor’s operations, and ensure contractors are properly classified to obtain the proper rate for their respective hazard.
ISC’s Small Contractor GL Program/Equipment Coverage
ISC’s small contractor GL program is available on a national business and is particularly strong in the Sunbelt states (California, Arizona, Texas, and Florida) where historically there has been a great deal of activity. Agents can quickly quote, rate, and bind coverage online.
“We understand that for small accounts to be profitable for agents, agents need to be able to respond quickly to a contractor’s needs to get on a job fast while spending minimal time in quoting and obtaining coverage for their clients. Our automated platform is ideally suited for the small contractor GL space,” notes Michael.
In addition to providing General Liability insurance for small contractors, Equipment coverage is also available. The type of equipment covered includes hand tools, small power equipment, generators, skid-steers, and backhoes. There is a $100,000 limit on the policy. “We typically provide Equipment coverage for contractors for whom we write the GL, although we do write some Equipment-only policies as well,” explains Michael.
ISC’s Premier GL Contractor: New in 2022
ISC’s Premier Contractor’s General Liability program is designed for larger contractors working on larger jobs in challenging jurisdictions. “The program is exclusive in both the type of contractors we write and our agency partners,” says Michael. “We work with agencies that have deep knowledge in construction with active contacts in the industry.”
These larger accounts require much more complex policies that take into account the hazards associated with large building projects. The underwriting process is more in-depth and customized as larger contractors take on much more risk than those in the small contractor GL program. “We need to ensure that proper safety standards are in place, contractors are adequately capitalized, and staff training is a high priority.”