The Impact of Rising Building Costs

The year 2020 witnessed an extraordinary sequence of 63 , ranging from Midwestern tornadoes to Western wildfires and Southeastern hurricanes, intensifying the challenges posed by the COVID-19 pandemic. As communities and businesses sought to rebuild, the demand for labor and building materials surged, triggering in costs.

Fast forward to 2023, global insured losses , marking a record-setting year for catastrophic events. According to reports from Aon and Gallagher Re, severe convective storms (SCS) represented . In the United States, six out of the ten most expensive events were attributed to SCS events, further underscoring the escalating frequency and severity of natural disasters. And since January 2020, national reconstruction costs have risen by an average of 8.1%, with material costs experiencing a 5.2% increase on average. Lumber prices, in particular, have in certain regions, exacerbating the financial strain on businesses and the urgent need for robust risk management strategies to mitigate the impact of future catastrophes.

What is ‘Insurance to Value’?

is a fundamental concept in risk management, representing the ratio of the insurance coverage amount to the actual value of the asset being insured. In the context of property insurance, if the insured value is less than the actual value of the property, it results in an incomplete Insurance to Value ratio. Inadequate ITV can leave policyholders exposed to substantial financial loss in the event of a claim, underscoring the importance of regularly reassessing coverage to align with the true value of assets.

The Implications of ITV

Inflation has also had a profound impact. Nonresidential with a 37% increase over the past four years. 65% increase in fabricated structural steel. 37% increase in the price of concrete products. Machinery and equipment costs have increased 22% over the same period. And as the cost-of-living rises, so does the value of assets; failure to adjust insurance coverage in response to inflation can result in inaccurate ITV ratios, leaving policyholders underinsured. For instance, if the value of real property or equipment appreciates due to inflation and insurance coverage remains static, the ITV ratio declines, potentially leading to financial vulnerability in the face of unforeseen events.

of rising building costs on Insurance to Value (ITV) is crucial to ensuring appropriate coverage in the event of a loss. Delays in post-loss recovery due to skilled labor shortages and expensive materials may expose businesses to exceeding policy limitations, with prolonged recovery times potentially surpassing the period of indemnity. But the consequences of an inaccurate or artificially low ITV extend beyond immediate cost savings; underreported values can lead to underinsurance or trigger coinsurance penalties. Notably, an inaccurate ITV is a primary cause of property claim litigation, as policyholders may find themselves inadequately covered in the event of a total loss.

Strategic Imperatives

Amidst the complexity of inflationary pressures and volatile market conditions, insurance agents play a pivotal role in guiding policyholders through the intricacies of ITV calculations. Here are some for agencies to consider:

• Proactive Client Engagement: Think about initiating mid-term meetings to educate policyholders about the implications of rising building costs and the importance of maintaining adequate coverage. By fostering open communication and providing insights into market dynamics, agents can empower clients to make informed decisions about their insurance needs.
• Precision in Rebuilding Cost Estimates: Be sure to conduct thorough reassessments of buildings, contents, and equipment replacement cost estimates to ensure alignment with current market trends. By staying abreast of supply chain disruptions and labor shortages, you can anticipate potential delays and cost fluctuations, thereby mitigating policyholder risks.
• Contingency Planning for Supply Chain Disruptions: Given the prolonged impact of supply chain disruptions, work with policyholders to develop robust contingency plans for sourcing and procurement. Diversifying supply chain networks and exploring alternative sourcing options can also help mitigate the impact of disruptions on reconstruction efforts. And, considering the extended timelines for recovery due to supply chain disruptions, it’s also essential to factor in these delays when calculating business income. By accurately assessing the potential impact of prolonged recovery periods on cash flow, you can make informed decisions and ensure your continuity even in the face of unforeseen challenges.
• Vigilance in Policy Review and Revision: Collaborate closely with policyholders including comprehensive reviews of policy limits and sub-limits to ensure adequate coverage. By advocating for policy terms that reflect the true replacement costs of assets, you can safeguard businesses against the risks of underinsurance and coinsurance penalties.

Looking Ahead

In a landscape marked by inflation, rising building costs, and frequent catastrophic events, policyholders, insurers, and agents must collaborate to navigate the complexities of Insurance to Value, ensuring that coverage remains commensurate with the evolving value of assets.

By addressing these challenges head-on, the industry can adapt to the changing landscape and continue to provide robust protection for individuals and businesses alike. Fostering proactive client engagement, precision in rebuilding cost estimates, and vigilance in policy review are essential strategies for agents navigating the shifting terrain of ITV with confidence and resilience. The pursuit of accurate Insurance to Value serves as a cornerstone for protecting policyholders against potential losses and fortifying their financial resilience.

The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials contained in this article are for general informational purposes only.聽 Policyholders should speak to their agents directly to address any concerns they may have regarding their ITV.

Now situated in Olive Branch, Mississippi, with a workforce exceeding 200 and a fleet of over 70 vehicles on the road every day, Michael Hatcher & Associates is deeply invested in maintaining the highest standards of safety and operational efficiency.

础尘别谤颈蝉耻谤别鈥檚 partnership and safety journey with agency, , started with Michael Hatcher & Associates in 2010. Initially, the service delivery was focused on improving the overall safety culture and safety procedures for their employees. After making great strides in reducing the frequency and severity of worker鈥檚 compensation claims, the next step switched to improving key leading indicators in their fleet safety program.

In 2020, a strategic initiative was launched in collaboration with Josh Wilder, Safety Manager at Michael Hatcher & Associates. This initiative aimed to fortify driver selection procedures and leverage cutting-edge fleet technology solutions. Measures included the implementation of annual Motor Vehicle Records (MVR) reviews and the integration of advanced telematics controls.

Wilder expressed the impact of the partnership:

Working with the 91黑料网 and Insight team has been great. By implementing both MVR & telematics, we have been able to get in front of potential driver issues. Anytime I need help, they are quick to respond and provide feedback too. Our team has bought into the process, and we are reaping the benefits.

A critical aspect of this improvement strategy was the introduction of a third-party vendor, iiX, recommended by 91黑料网. This partnership allowed for comprehensive MVR checks on all company drivers, benefiting from preferred pricing arrangements with iiX. In 2021, Michael Hatcher & Associates fully institutionalized an annual MVR check for all company drivers, adhering to meticulously defined criteria to ensure the safest drivers were operating company vehicles. 

Building on this foundation, 91黑料网 Risk Management teams collaborated with Michael Hatcher & Associates to enhance the utilization of existing telematics systems. This involved monitoring driver speed, aggressive driving behaviors (such as hard braking, turning, and acceleration), and seatbelt usage. The resulting data facilitated the creation of weekly driver reports by Wilder, enabling company managers to instill accountability and find opportunities to address at-risk behaviors by immediately coaching the driver.

Pat Siano, agency producer and Insight Risk Management Vice President, highlighted the longstanding commitment to safety:

Michael Hatcher & Associates has been a long-time 91黑料网 policyholder, and their commitment to safety is second to none. They are proactive in their relationship with their 91黑料网 Risk Management Consultant, Jeremy Biggs, whether it is including him in safety discussions or putting in place any recommendations that he makes to help them improve their safety culture.

The outcomes of these strategic enhancements are more than noteworthy. Michael Hatcher & Associates has achieved an average annual reduction of 95% in the cost of auto claims, coupled with an 87% reduction in the frequency of auto claims. This success underscores their unwavering commitment to safety, operational excellence, and continuous improvement, positioning them as a benchmark in the industry.

If you are interested in implementing an MVR program or utilizing telematics to improve your company鈥檚 overall fleet risk, please contact your 91黑料网 Risk Management consultant. If you are interested in coverage and our risk management services, find an agency here and one of our partners will assist you.

When following the proper channels, businesses can benefit from the support that comes with coordinating the claims process through an expert. Claims representatives have proven knowledge and experience to settle claims at the lowest possible amount while also providing lifecycle claims handling, offering customized support, and detecting potential fraud. Claims representatives are also able to close the claim as soon as possible, helping with the prevention of high litigation costs.

Claims Costs & Reporting Lag Time

Depending on business size, the cost of a claim can impact a company鈥檚 Experience Modification Rate (for Workers鈥� Compensation) and underwriting discretionary pricing. (EMR), also known as experience modification factors or an experience modifier, are a comparison of a company鈥檚 expected Workers鈥� Compensation claim costs versus the actual claim costs.

To support strong EMR results and reduce overall costs, it is in a company鈥檚 best interest to report a claim as soon as it occurs. There are numerous studies confirming that the sooner an insurance carrier can work on claim management, the lower the ultimate payout will be. In fact, according to a research brief on the relationship between accident reporting lag times and claim cost in Workers鈥� Compensation by the the median cost of claims reported one day after an incident was significantly lower than claims that were reported two weeks after an incident.

Best Practices for Claims Handling

It is crucial to report a claim immediately to your company鈥檚 insurance carrier to enable the carrier to assign an expert to handle the claim, create a case number for the incident, and begin to control the cost. If a claim occurs during your policy period, make sure to report the claim as soon as possible directly through the insurance carrier鈥檚 website or phone number.

Reporting claims promptly will benefit your company and, ultimately, help keep insurance costs low.

Learn More

础尘别谤颈蝉耻谤别鈥檚 SureClaims experience leverages cost-saving practices to help protect your bottom line. Minimize total costs through technology, clinical expertise, medical provider collaboration, and negotiation services, including medical bill review, injury fraud prevention, early return-to-work programs, risk mitigation, managed medical costs and our digital first notice of loss portal.

Adapt the Culture
When a worker becomes injured or sick while on the job, their situation may soon take a toll on the company’s overall costs. The longer the injured worker is away from the job, the higher the total expenses, resulting in an increased likelihood of overall lost productivity in the workplace.

An effective return-to-work program can provide financial relief for employers 鈥� but the company must be willing to understand and adapt the culture in order to implement such a strategy successfully.

Welcoming current employees back in a limited or modified role can remove the need to hire temporary staff. Some employers may fear that allowing workers to return too early might lead to more severe injuries; however, this is rarely the case, according to the American Society of Safety Professionals.

Know Your Options

Many return-to-work programs focus on bringing injured employees back to work as soon as they are medically able. Without sacrificing quality care, this type of program facilitates productivity and contains costs by allowing an employee to contribute within their abilities until they can return to their full-duty job. Options for a successful return-to-work program may include:

• Modified work 鈥� a return to the job with duties modified
• Transitional work 鈥� a return to the job with different duties
• Alternate work 鈥� a return to the company within a new role

Understand the Benefits
Businesses can experience a number of benefits from an effective return-to-work program, including minimizing insurance costs and improving their bottom line. According to WorkersCompensation.com, one of the major benefits of a return-to-work program is the ability to ease workers back into the job:

• Enabling employees to remain productive can help them stay motivated and maintain skillsets
• Return-to-work programs can help employers reduce absenteeism,
• A return-to-work program can improve employee relations 鈥� while an injured person is learning the ropes again, the business owner or manager and team should stay engaged in the process

Effective return-to-work programs can help reduce insurance costs, ease workers back into the job, remove the need to hire temporary staff, and reduce the length of injury-related absences.

LEARN MORE: BENEFITS OF AN EARLY RETURN-TO-WORK PROGRAM

The construction industry suffers an average of 150,000 accidents per year, and one in 10 construction workers sustain injury. The Occupational Safety and Health Administration (OSHA) regularly promotes new safety rules and updates existing rules for the industry. It is expected that OSHA鈥檚 focus on the industry will accelerate in 2021.

We sat down with Jenny Fogle, 础尘别谤颈蝉耻谤别鈥檚 claims unit manager, and Casey Cain, 础尘别谤颈蝉耻谤别鈥檚 risk management manager, to discuss some of the most common Workers鈥� Compensation claims they see and how they help customers avoid them.

The Occupational Safety and Health Administration (OSHA) recently updated its guidance for mitigating and preventing the spread of COVID-19 in the workplace. The guidance includes recommendations specifically for workers in higher-risk workplaces such as manufacturing; meat, seafood and poultry processing; agricultural processing; and high-volume retail/grocery.

Employers have a responsibility to help provide workers with a place of employment that is free from recognized hazards, including those brought on by winter weather. Construction business owners should consider the following safety tips to help protect their workers on the jobsite during the winter months.

The Occupational Safety and Health Administration (OSHA) released its preliminary list of the top 10 most frequently cited safety violations at this month鈥檚 National Safety Council Congress & Expo, the world鈥檚 largest gathering of safety professionals. The OSHA list is determined following worksite inspections throughout the fiscal year and alerts employees and safety professionals about areas of frequent citations to help prevent their occurrence.

Browse for more helpful content and resources.

There are often misconceptions about the best ways for healthcare workers to safely handle patients while avoiding occupational injuries. In fact, manual patient handling is one of the healthcare industry鈥檚 major occupational risks, according to The National Institutes of Health.

Becoming aware of common misconceptions around patient handling can help teams reduce the risk of injuries for workers.

• Mechanical lift equipment efficiency
• Annual competency sessions
• Mentoring and 鈥渟afety champions鈥�
• Patient mobility capabilities

Specifically, employers rely heavily on workers’ compensation insurance as a way to protect the health of both their companies and staff members. Accidents, injuries and illnesses can appear at any time in the workplace, and without indemnification those expenses can be quite high. Even so, mismanaging out-of-work employees can be just as costly, so many businesses are looking for effective ways to control injuries and ensure that workers get back on the job as quickly – and safely – as possible.

As a result, return-to-work programs have gained popularity across the country. As an employer yourself, here are a few pros and cons that can shed some light on these transitional work programs:

The company needs to adapt
When a worker gets injured, they soon begin to take a toll on the company’s workers’ comp insurance. The longer they are away from the job, the higher the costs,聽resulting in an聽increased聽likelihood of lost productivity in the workplace. Therefore, it becomes a priority to find a way to get them back – or replace their output in a cost-effective manner for a short period of time.

A return-to-work program can provide relief for employers, but their companies must be willing to adapt in order to implement such a strategy successfully. According to the American Society of Safety Engineers, problems can arise if modified job openings aren’t in place for injured workers. The heart of a return-to-work program is bringing back employees in lighter roles for a short while, helping them transition from off the job back into the workforce. This will prevent them from taking a toll on insurance, but the positions need to be there in order for this to happen.

In addition, company culture may be against a transitional duty program. For example, some people may feel that bringing workers back too early can lead to more severe injuries, but this is rarely the case, according to the聽ASSE. The longer they are away from the job the more likely they are to never come back.

Moreover, some employers may feel that all staff members must be operating at 100 percent capacity. However, it is better to have workers be somewhat productive instead of simply sitting at home on the couch.

RTW program can provide benefits
If a company is willing to implement a return-to-work program, there is a chance they can experience a number of benefits they otherwise would have missed out on. Primarily, they’ll be able to cut insurance costs, but they can also find other ways to boost the bottom line.

According to WorkersCompensation.com, one of the biggest pros of this type of program is the ability to . An injury can be tough on a person’s mindset, and letting them be productive and stay involved can help them stay motivated and positive. Better yet, bringing them back in a limited role can remove the need to hire temporary staff members to fill the void, saving money at the same time.

Furthermore, WorkersCompensation.com explained that a return-to-work program is a good way to improve boss-employee relations. While an injured person is learning the ropes again, the business owner can stay involved in the process. In many cases, this level of personal contact can be hard to come by.

With these pros and cons in mind, you may want to evaluate your existing business to determine whether or not a transitional duty program is the right choice for you.