Press Release
Contractors See Less Moderation In Insurance Market Than Other Businesses
Orlando, FL, November 10, 2004—A survey just conducted by International Risk Management Institute, Inc. (IRMI) shows that the insurance marketplace has not moderated as much for the construction industry as has been reported for U.S. businesses as a group by other organizations. While the survey provides evidence of a stabilizing marketplace, it also shows it is far from a "soft market."
IRMI conducted the survey by polling registrants to the 24th IRMI Construction Risk Conference in October with a goal of identifying trends and developments in construction risk management and the construction insurance market. There were 263 usable responses to the questionnaires. Respondents included construction company, project owner, and developer risk managers; insurance agents/brokers; and insurance underwriters.
The survey included one question focused on learning the respondent's recent experience in the insurance marketplace (most recent renewal for risk managers or last 6 months for insurance professionals). The table below summarizes the responses for all respondents, all contractors, the two types of construction with the highest representation in the survey, and insurance professionals. The respondents have recently had a wide variety of experiences in the marketplace, from increases in excess of 20 percent to decreases greater than that.
"As one would expect in a stabilizing market, the majority (61.6 percent) have seen rates and premiums change only slightly, from +10 percent to -10 percent, and most of these (50.7 percent of the total) have seen no change or a slight increase from last year," said IRMI president Jack Gibson. "However, since 56.4 percent have seen increases of some magnitude, the current marketplace certainly could not be described as 'soft.'"
It is interesting that fewer residential contractors experienced increases on their last renewal than did commercial building contractors given that the marketplace for residential construction has been much more difficult in recent years. The difficulty insuring residential contractors was made abundantly clear in the agent/broker responses to certain other open-ended questions. When asked what types of contractors were the most difficult to place in the current market, the agents/brokers overwhelmingly listed residential or habitational. Of the 77 agents/brokers who answered this question, 49 provided that response. Conversely, commercial building contractors were listed as among the easiest to place. It seems possible that the residential contractors in the survey received such substantial premium increases in prior years that their 2004 renewals were not as onerous as experienced by the commercial contractors, but this is only speculation.
In summary, the survey documents a slight moderation in the marketplace for contractor insurance. While it is not easing as much as many other industries may have seen, contractors with good loss experience are seeing some reductions. Of course, residential business is still difficult to place, and responses to other questions show that underwriters are continuing to exclude difficult risks such as silica and mold.
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