There are many elements involved in embarking on any commercial project, and there are also many players who support the foundation of a commercial construction project.
From selecting a good general contractor to sourcing materials and hiring reliable subcontractors, there are many aspects that need to be in place before construction can begin.
When it comes to mitigating the risks involved in any proposed commercial project, commercial construction insurers should consider specific criteria and ensure they are met for a builder to have insurance coverage in place. necessary.
According to Jim English (pictured above), Senior Technical Specialist at Economical Insurance, there are specifically “six pieces of information Economical Insurance looks for when focusing on a new construction project in the mid-sized commercial market. “.
English also points out that another crucial link in facilitating the business underwriting process is maintaining a good working relationship with experienced construction brokers who understand the business and obtaining useful background information from them to help complete the overall risk picture.
Six key pieces of information to assess builders’ risk
At the top of the list, and an obvious piece of the subscription puzzle, is filling out a full application form.
“By completing an application form, details can be provided about the builder’s risk, including critical information such as protection, exposures and construction materials,” English emphasized.
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Next, English clarified that access to a good Geotech report that describes variables such as soil conditions is a second key piece of information used by commercial insurers.
The third category of information that will be assessed includes “site plans and drawings. An artistic rendering of the project is also very helpful, ”said English.
The construction schedule and a copy of the contract provide the fourth and fifth pieces of information to help assess the builder’s risk exposures.
The last piece of the underwriting puzzle (but not the least important) is general contractor information. Their experience, track record and financial strength are all important underwriting factors to consider.
Steve Beeston (pictured immediately above), Technical Specialist at Economical Insurance, drew attention to the particular importance of general contractor underwriting.
“The general contractor will be the one who does the work. They won’t always work. Most of their scope will be project management, the way they run their trades, ”Beeston explained.
“Have a good prequalification of subcontractors and ensure that they have performed similar work in terms of size, duration and scope, as well as understand how the general contractor will deal with losses caused by the subcontractor. dealing during construction or even after construction ”Beeston added.
While the information is relevant to the business underwriting process, Beeston stressed that understanding and knowing the people who will be performing the work is also central to the process.
“Applications, geotechnical or consultant reports, site plans, contracts and construction schedules are all paperwork in the end. Learn to understand the people who do the work and the companies behind the companies who do the work. It’s also important for us to be able to understand and cover a builder’s risk, ”Beeston explained.
Why is information important?
Forming a complete picture of a builder and a full picture of the current project is the only way to ensure that any potential risk is properly covered.
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Using the information available and studying all relevant documents will allow a construction insurer to gain a holistic view of a proposed business project and understand what it is trying to accomplish.
English and Beeston both pointed out that another part of the underwriting table includes any incidental costs associated with the business plan.
“Low cost is an area of builder risk coverage that is easily misunderstood, and knowledgeable construction brokers will most likely have a good understanding of this area. Understanding what types of ancillary costs need to be insured is a key step in placing manufacturers’ risk coverage, ”Beeston explained.
This is when the key element of working with seasoned construction broker partners becomes so vital for underwriting business.
“This is a meeting of minds between the broker and the insurance company as to what we know of the ancillary costs covered by the builder’s risk policy,” Beeston said.
“We have these necessary discussions and interactions with brokers to make sure everyone understands what is covered. It’s about figuring out how to quantify that risk, and a broker who’s good knows how to do it and has a dialogue with their own client and then passes it on to the insurance company, ”added English.
For all players, both on the risk mitigation side and those involved in a proposed business project, having all the pieces of the game in place is essential. These key pieces include the necessary documents, a supporting construction broker, and a commercial insurer to put together the information allowing commercial construction to proceed without any risky cracks in the foundation.
Jim English is a Senior Technical Specialist at Economical in Canada. He spent his career working for many years in the insurance, reinsurance and brokerage industries before joining Economical in February 2021.
Steven Beeston is a construction specialist for Economical in Western Canada. He has spent most of his career working on construction risks for one of the world’s largest companies before joining Economical in June 2021.