This Partner Perspective is part of a series brought to you by Liberty Mutual.
The construction insurance market continues to present significant opportunity for agents and brokers, but it also faces new and evolving challenges, particularly from the prevalence of legal system abuse and the casualty-heavy nature of construction risks.
Scott Lombardi, Executive Vice President and Chief Product Officer for Small Commercial at Liberty Mutual, says success in the construction market increasingly depends on precision: understanding what a contractor actually does, how consistently the work is performed, where the business operates, and how any related subcontractor relationships are managed.
What’s the biggest shift you’re seeing in small commercial construction right now?
The biggest shift is the impact of legal system abuse, which occurs when certain parties, such as some plaintiff attorneys and third-party litigation financiers, exploit the legal process to obtain outsized financial awards. That drives claim costs and settlements higher than historical loss experience would suggest.
This is happening more frequently in construction because it is an industry heavily weighted toward casualty coverage. The coverages that come into play most for construction are general liability, umbrella, and commercial auto, so changes in the legal environment can have a significant impact on the industry.
We pay close attention to litigation trends in the construction space, including how legal costs and jury verdicts have shifted over the past three years, and that informs how we underwrite and price risk.
The key is not to treat construction as one uniform market. A contractor operating in a relatively benign legal environment, for example, presents a different risk from one working in a more challenging area. The more precisely we understand those differences, the more appropriately we can price the exposure and maintain a broad appetite.
Why does Liberty Mutual continue to lean into construction when some carriers are becoming more selective?
Construction continues to be a core part of our small commercial business. It’s also been a fast-growing market. While growth has slowed somewhat more recently, particularly on the residential side, it still presents significant opportunity.
Our goal is to always be the go-to construction market for agents and brokers. Our refreshed quoting experience lends itself well to this area as it’s designed around how agents and brokers work, with expanded products and backed by a brand that customers recognize.
And because of our long history in construction, we have strong data that allows us to better understand the different types of exposures and how they perform. That gives us a more granular basis for pricing different construction risks. This precision helps us distinguish opportunities from risk rather than applying one broad view to the entire construction market.
Beyond general liability, umbrella, and commercial auto, which coverages do construction clients most often underestimate?
While liability, umbrella, and commercial auto tend to get the most attention, contractors’ equipment and inland marine coverages are often overlooked. Construction businesses rely on equipment and property that are constantly moving between job sites, and that’s an area where we see clients underinsured.
What mistakes do agents make when submitting a construction risk, and what information should they gather up front to speed up the quote?
The biggest opportunity we see is understanding the specific work being performed versus treating “construction” as the general exposure. For instance, an electrician, HVAC contractor, plumber, and handyperson may all be described as construction businesses, but they represent very different risk profiles. We generally prefer specialists because contractors that perform the same type of work repeatedly tend to produce more predictable underwriting results.
When submitting, agents should also provide a clear picture of any subcontractor relationships: who is performing the work, what insurance subcontractors are required to carry, and how additional insured status is secured and verified. These details matter from both an underwriting and coverage perspective.
The more specific and complete the submission, the faster we can assess the exposure and respond with the right coverage and price.
What advice would you give to agents and brokers who want to grow with Liberty Mutual in construction over the next year?
We want agents to think of Liberty Mutual as one of their top construction markets. Our deep and consistent history insuring construction clients, our broad underwriting appetite, and our enhanced capabilities make us a dependable partner agents and brokers can count on in this industry.
