How Insurance Purchasing Decisions Vary by Construction Specialty

Professionals delivering risk management and insurance services to the construction industry understand, based on their experience, that the types of insurance policies and limits purchased vary by the specialty of a given contractor. Developing actual data to prove those anecdotes and experiences has historically been difficult.

The recently published Assurex Global 2023 Construction Benchmark Report provides detailed information on the insurance purchasing decisions of 1,624 construction companies in five different specialties. The specialties in the report are defined by NAICS code into five specific categories.

  • General construction (NAICS 2361XX and 2362XX)
  • Heating, ventilating, air conditioning, electrical, and plumbing (NAICS 2382XX)
  • Highway/underground (NAICS 2371XX and 2373XX)
  • Trade contractors (NAICS 2381XX and 2383XX), which include such specialties as foundations, exterior finishes, framing, masonry, and finishing
  • Other specialties (NAICS 2389XX) — an “all other category”

Many of the differences are predictable and were confirmed by the benchmark report. For example, Payroll as a percentage of revenue varied widely by industry segment, with highway/heavy contractors having the lowest payroll as a percentage of revenue and the plumbing/HVAC group having the largest. Contractor’s equipment coverage also varied by segment, with highway/underground having the highest limits of contractor’s equipment.

Many of the differences between specialties are more subtle yet very interesting.

  • There was significant variability in contractor size between specialty areas.
  • Excess liability limits increased significantly compared to last year.
  • Excess liability rates and premiums increased moderately to dramatically, depending on the class of contractor.
  • Contractor’s equipment limits were lower than we expected. While the highway/underground category had the greatest values, even those values seemed relatively modest.
  • The percentage of firms purchasing contractor’s professional liability increased compared to our last survey.
  • The percentage of firms purchasing environmental impairment liability coverage was higher than in our last survey.
  • There was substantial variability between segments in the purchase of directors and officers liability (D&O) and cyber coverage.
  • The incidence of subcontractor default coverage increased compared to last year.
  • The incidence of owners and contractors protective policies increased compared to last year.

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