What You Can Do to Shrink Your Construction Insurance Costs

By: Sam Veith

The best companies believe in zero accidents in having a top-down safety culture.

Workers’ compensation insurance is normally the highest line item for commercial or large residential construction companies’ insurance costs. The good thing is workers comp is the one part of your insurance premium you CAN control to minimize costs. What can your company do to shrink its construction insurance costs?

Be Safe During Construction Projects

The bottom line, being safe saves you money. Safe companies have fewer claims and good claim history will give you a great chance at getting the best construction insurance premiums.

Below are some of the basic steps contractors can take to tighten up their safety efforts:

• Formal safety program and training procedures
• Ongoing education and documentation
• Disciplinary Program
• Fleet / DOT and driver safety programs 
• Accident investigation and review board
• OSHA 10 & 30 certified training

Injury Management – Dealing With Workers Comp Costs

Do you know how to respond when an injury occurs? Knowing how to respond to claims is the reactive side to minimizing the impact a claim has on your Experience MOD Rating which directly impacts your work comp costs.

Keys to injury management:

• Return to work / light duty program
• EMR supervisor & employee education
• Knowing the difference between medical only vs. lost time injuries
• Build a relationship with an occupational health clinic
• Nurse triage and nurse case managers
• Work comp claims advocates
• Experience MOD rating analysis and claim reviews

Hire Better As Your Number of Employees Expands

We know it is getting tougher and tougher every day to find quality employees, but as insurance people like to say, “You hire your claims.” Identifying the right candidates to work for you will be key to long-term success.

Recommendations for better hiring practices:

• Hire referrals (and pay referral bonuses) from your good employees
• Use pre-employment strength testing (view video)
• Post-offer pre-employment physicals, drug testing, driving record and background checks
• New hire training: get your new employees entrenched in your safety program and instill your safety culture on day 1 of employment

Specializing Can Impact Your Business Insurance Costs

If a company is making many trades, that may look less favorably than a company that specializes. A “jack of all trades” to an underwriter is an accident waiting to happen. If you master your trade, the risk is much lower in an underwriter’s eyes.

Contractual Risk Transfer – Ensure All Parties Have the Correct Liability Coverage

If you hire subcontractors, you want to ensure their mistakes and claims don’t become yours. A subcontractor agreement is necessary to protect you from a subcontractor using your policy. Without a signed written agreement in place, you are the responsible party, not them.

More key points to consider:

• Contract review done by a construction attorney and insurance risk transfer consultants
• Certificate of insurance review
• Establishing subcontractor insurance coverage requirements

Align Yourself With Construction Risk Managers and Safety Experts

Many business owners can’t afford a full-time safety director. What you can do is work with an insurance agency/broker that offers resources above and beyond one that issues a policy every year. Any agency can get a good/fair price policy when claims are minimal. Still, agencies that invest in construction risk management resources are necessary for owners who are wearing many hats and need assistance in understanding insurance requirements and potential risks.

From there, there are many 3rd party safety resources and trade associations that have resources and specialize in helping construction industry companies mitigate risk. Horton Safety consultants help contractors formalize their safety programs, initiatives and monitor job sites to set a solid foundation for customers to build their safety culture for our clients.

Finally, every trade has different risk exposures regarding claim and injury potential. The higher the risk in your business, the more important all these factors become to do well. Each trade will have specific risks that need to be taken into account and customized for their line of work.

Below outlines the specialty trade risks according to most insurance companies:

Low:

• Electricians
• HVAC
• Plumbing
• Concrete
• Grading

Medium:    

• Masonry
• Excavating
• General Contracting
• Carpentry
• Insulation
• Utility
• Street and Road

High:       

• Steel Erection
• Demolition
• Roofing