The construction business has always dealt with a lot of risk. Even a relatively modest construction project must deal with architects, contractors, subcontractors, permits and more. And that’s not even mentioning the financing for the project or what the market will look like once it’s time to start selling or leasing the completed property.
A recent insurance industry report suggests that the risks are higher than usual at the moment, and may get worse in the near future.
The report
Selective Insurance, which insures many contractors, recently published its 2023 General Construction Risk Report, which looks at a wide range of factors — from economic trends to natural disasters — and studies how they are affecting the construction industry. Among many other concerns, the report discussed issues such as:
- Costs: For many consumer items, inflation is down from its peak a year ago, but costs continue to remain high for many building materials.
- Worker safety: The last couple years have seen a labor shortage in many industries. The construction industry has responded to this shortage by hiring more inexperienced workers. Selective Insurance claims that this has led to an increase in job-site accidents and injuries.
- Natural disasters: Extreme weather events and wildfires have taken a toll on construction projects in recent years and, due to climate change, this will become increasingly common in the years ahead.
- New materials and techniques: New technology such as 3-D printing promises to make some aspects of construction much easier, and possibly cheaper. However, these innovations may also bring new safety risks. It may be harder for people in the industry to spot possible defects in these materials early in the process, meaning they won’t be discovered until they become much more expensive to fix, and potentially more dangerous.
Construction litigation
Insurance companies take these risk factors into account when setting their premiums. Those in the construction industry can take steps to protect themselves from risks as well, but there’s only so much they can do.
In an industry where so much money is on the line and the risks are so great, legal disputes are common. These disputes are often risky and expensive by themselves. It’s important for contractors, developers and others to seek out skilled and experience advice.