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Controlling Your Risks in the Ever-Changing Insurance Marketplace

Over the last few decades, the considerations involved in managing a company’s risks have drastically changed.

Business risks that used to be inherent are much different today and, as a result, mitigation techniques are vastly different than those used in the ‘80s, ‘90s or even the ‘00s. As many business owners know, when it comes to the construction industry, the route to success is never an easy one. That is why it is crucial to understand the emerging risks that have the potential to considerably impact a business’ bottom-line. Factors that contribute to the increased growth of emerging risks include new economic, strategic, financial, operational, sales & marketing, technological, and even more recently, personnel developments.

This two part article, featured in this and the next CFA Concrete Facts magazine, will focus on the particular business risks that CFA members have identified in a recent Heat Map survey orchestrated by CFA 360 risk management program. The survey identified the CFA members’ top three business risks as: market competition, injury to a worker, and hiring. CFA respondents universally believe that these top three risks also have the most significant financial impact on their organizations over the coming years as well as present the most frequently faced risks. An interesting vital key point about the top three risks is that they are absolutely intertwined and the failure to collectively consider them will leave businesses unprotected. Simply stated … good hiring practices lead to workplace safety and quality work product, which help all businesses successfully compete in the market place and keep profits on the balance sheet.

The leadership of the CFA has addressed emerging risks for the association with its formation of the CFA 360 risk management program. Several years ago, the CFA leadership identified that controlling a business’s risk exposure to construction risks stretches far beyond what an insurance policy covers and requires that your risk management partner, your broker, must have evolved into having a deep industry expertise outside the standard scope of placing insurance. That partner must have the ability to proactively identify and evaluate business risks, and develop strategic solutions to protect your balance sheet.

Contractor Market Competition

CFA members identify market competition as their number one risk, and state that it consumes the greatest portion of company time and resources. This is not surprising based on the effects that the long, deep recession has had on the residential construction industry. Nearly eight years later, the residential construction sector is finally coming out on the other side, but still nowhere near the levels it was prior to the recession. Surprisingly enough, experience has taught us that more contractors go out of business during a recovery than during a recession. Margins remain very low as contractors compete to gain-back market share, while funding for construction remains far below pre-recession levels. Lack of adequate planning, poor financial strategies, poor record keeping, and excessive debt, to name just a few—identify the unique aspects of the construction business and brings added risks. Uncertainties of project financing, uneven profit recognition, weather, tedious and absent contract terms, lower labor productivity, labor shortage, tight schedules, and reliance on sub-contractors and suppliers add even more risk. Add them all together and it’s no wonder that consistent profitability and long-term success are such a challenge for contractors.

How do you beat the challenges described above — sell yourself differently than your competition does! Bragging about your risk management program is one of your best hidden tools when marketing your company to owners, builders, and general contractors. A robust and strong risk management program should be used as leverage against your competition. Much like the CFA heat map results, our General Contractors’ and Owners survey showed their number one concern as being able to hire a sub- contractor with a solid risk safety program. It just makes good business sense for them financially since the general contractor’s profitability is directly related to the performance of its sub-contractors. In this instance, partnering with your insurance broker to better publicize your risk management program can be a leading factor in being considered for a project and, often times, the key to a company being awarded the work in a tight bidding situations. There are a lot of different ways this can be accomplished. One way is to set up a marketing campaign that promotes the fact that your company has a positive experience modification.

How to be a smarter bidder? With increased competition, the dynamics of the bidding process has become progressively more difficult for contractors to manage. At the top of the list of business costs included within your bids are those contained in your insurance premiums and hopefully the management of your risk management strategy. It seems only logical that the best way to address all of the aforementioned areas of concern is to establish a bid rate within your job costing model that includes the realistic risk management cost ranges for your average projects. The key elements to always consider and factor into a Total Cost Risk, as well as the bidding rates, include:

  • Training/Hiring
  • Premiums and Retentions
  • Insurance renewal fluctuations especially where projects are long-term
  • Safety Program Administration and equipment
  • Regulatory costs – OSHA and NCCI
  • Return to work programs
  • Administrative and internal risk management costs
  • New Equipment

Why on earth would I raise my bid rates? The reason is simple; once you are able to measure your total cost of risk, your next step should be to plan to drive down the costs that drive the premium everyone is so eager to talk about. However, if you count the pennies, the dollars will take care of themselves. Likewise, if you count the costs within the Total Cost of Risk, the premium dollars will naturally take care of themselves! Costs that make you a more educated bidder protect your profits on a job while indicating to the general contractor or owner you are serious about your risk management program.

Your competition comes in all shapes and sizes, and the level of sophistication and their internal risk management capabilities can vary widely. You need to be in a position to make refined business decisions that allow you to be more aggressive on jobs that you realize are in your company’s wheel house verses jobs where you are less confident. By adding Total Cost of Risk into your bid rates you will have that flexibility and the ability to focus on the projects that are best suited to your business and appetite for risk.

The CFA 360 Risk Management Strategies to Address Marketing Competition:

  1. The trick is to develop a method of calculating your Total Cost of Risk to protect your bottom-line while validating those costs for owners,
  2. Market your company’s best practices to your buyers, and
  3. Develop a competitive advantage or wiggle room when bidding or negotiating projects.


Put aside the heavy equipment, powerful tools, concrete, steel beams and other tangible costs associated with the construction industry. Hiring and retaining talented employees requires companies to focus on the intangibles, such as a potential hire’s individual goals and values. Number two on your list of risks, and for good reason, is the risk of Hiring. Smart hiring plays a key role in managing your risk. CFA companies must strategize about their hiring decisions, continually assessing their workforce and aligning them with future business plans. It sounds obvious, but it’s really about hiring the right people. Shortages in skilled workers are expected to grow. The average age of skilled workers in America today is 55, and if they had the choice, most of the people in that group would retire today. As the baby boomer generation reaches retirement age, and the entry rate of new skilled laborers remains stagnant, the shortage in the skilled labor workforce will continue to grow. In addition, there are emerging risks, such as dealing with the Millennials. Millions of dollars are being invested into figuring out how to hire, train, and retain this new generation of workers. Changes in federal laws that include the Fair Labor Standards Act, which will increase the salary level for exempt employees, the OSHA Respirable Silica Standard, raising cost of medical treatment for injured workers, and the potential for higher interest rates will all impact the new construction housing market.

Being aware of and having a plan to address all of these emerging cost drivers will allow you to create a more positive business plan that reduces risk factors.

What practices have you designed and implemented to manage the risk of hiring? Internally tightening up your job descriptions is one way to create a more focused hiring process that will give you a clear idea of what type of employee is the right fit for your company. There are some economical ways to implement testing and candidate evaluation on the front- end of hiring that can help you make better choices among the applicant pool in your industry. Furthermore, detailed testing such as background checks, personality assessments, and strength/capabilities testing are also excellent ways to gain insight into the background of a potential hire.

Do you know what incentives you offer your employees and candidates as opposed to your competition? Increased competition in the job market means that employers are implementing measures such as continuing health benefits beyond construction season, and offering paid vacations, sick leave and retirement plans, will attract the best talent. Potential employees also are looking for things that will enrich their careers and enhance the quality of their work lives, such as continuing education and excellent safety programs.

The CFA 360 Risk Management Strategies to Address Hiring Risks:

  1. Sample the CFA membership to examine benefits packages that are offered workers, gain insight on what is working and what is not.
  2. Leverage the CFA buying power to implement a system that will assist members in hiring practice via pre-hire testing. And,
  3. Develop a plan to that gives CFA members a competitive advantage in the job market.

Every person matters. As a result, safety matters even more. Establishing a commitment to a strong safety culture that will protect your employees and business partners has enormous value. Likewise, updating your company’s strategic safety plan with innovative solutions and safety training methods as the industry continually develops will aid in carrying your company’s legacy into the future. Stay tuned for the next Concrete Facts article for the continuation of this deep dive into the topic of Injury to a Worker / Work Place Injury.

Despite the always changing construction risk environment, some business owners still buy insurance based only on evaluating their premium dollars and do not evaluate or consider how their insurance broker assists in managing all their business risks. Buyers who have developed along with this transition have adopted their buying considerations on managing risks and gauge their annual insurance costs are impacted by those risks, based on a Total Cost of Risk approach. Managing your business’ Total Cost of Risk measures all financial considerations that include the insurance choices, but also allows the buyer the ability to measure the financial aspects of all known risks.













Kristen Long
A.J. Gallagher


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Concrete FACTS, a publication of the Concrete Foundations Association, is THE voice for residential concrete industry news, market intelligence, business strategies, technical solutions, product information, and other resources for professionals in the cast-in-place concrete industry. Subscriptions to Concrete FACTS is available to anyone involved or interested in the residential concrete industry as a service to your industry. Please contact CFA Headquarters to find out more about your free subscription or Email Us