The power of IoT technology to transform construction risks
Building construction projects are no strangers to risks. From water damage, caused by leaks and infiltration, and national catastrophe perils to schedule delays and budget overruns, construction projects are confronted with challenges at every stage.
The industry is currently facing escalating costs for builder’s risk insurance, driven in part by major water damage incidents representing up to 70% of claims, as well as deductible increases of 10 times or more. Across all stages of the construction lifecycle, technology solutions hold the promise of not only reducing the frequency and severity of incidents, but also fundamentally transforming how risks are managed and insurance coverage is placed. Internet of Things (IoT) technology stands at the forefront, adding value from pre-construction through post-construction by helping to de-risk, predict, prevent, detect, and mitigate the severity of water damage incidents that do occur.
IoT risk mitigation technology, comprising smart, cloud-connected sensors and devices, empowers project stakeholders with real-time jobsite data, actionable alerts and automations, as well as powerful insights and analytics. These tools are enhancing loss control, reducing policy risks, and are increasingly being used to inform data-driven underwriting practices. The application of IoT technology in the pre-construction, construction, and post-construction phases of building projects brings a myriad of benefits to risk managers, brokers, insurers and project teams alike. From driving insurance benefits to optimizing performance, IoT technology is reducing risk and improving productivity in the construction industry.
Pre-construction
In the world of building construction, success is often determined before construction starts. In the pre-construction phase, IoT technology is playing a pivotal role in helping to de-risk projects upfront before builder’s risk insurance is bound, helping insureds put their best foot forward to markets as a better risk to insure.
As a best practice, risk managers and project teams are working with a trusted technology provider to develop project-specific water mitigation plans upfront, outlining the deployment of IoT-enabled loss controls. Plan development involves reviewing the drawing package and construction schedule to define a scope of protection aligned to project-specific requirements and exposures. Taking a proactive approach to scoping the implementation of water mitigation technology in pre-construction adds significant value by driving alignment between the owner/developer, general contractor, and sub-trades, establishing a technology budget upfront, and helping to de-risk the project before binding insurance coverage.
By including a detailed IoT-enabled water loss control plan as part of their submission package to markets, insureds and their brokers are providing underwriters with enhanced visibility to better assess project risk upfront and price policy coverage accordingly. By proactively communicating a strategy around the use of IoT-enabled loss controls in pre-construction, insureds increase the likelihood of securing more cost-effective insurance coverage from carriers — in the form of preferred deductible structures, additional capacity, and in some instances lower rates — helping to mitigate escalating insurance costs.
A key component of this proactive approach is the issuance of a Certificate of Protection by the technology provider. Appended to the project-specific water technology mitigation plan, this serves as a powerful tool in the broker’s submission to markets, providing underwriters with certainty and confidence that the insured has committed to implementing the technology. With up to 70% of builder’s risk claims stemming from water damage and deductible amounts reaching over $1M in some markets, the ability to proactively de-risk and mitigate water-related risks is invaluable in helping to drive down insurance costs for all stakeholders.
Early engagement between the insured, broker, technology provider, and lead carrier during the pre-construction phase not only fosters collaboration but unlocks significant value. These partners can offer vital insights into project-specific risks and recommend tailored risk mitigation solutions, laying the foundation for a successful construction project. Proactively addressing risks upfront, demonstrating superior insurability, and fostering collaboration between partners enables insureds to build better and deliver a profitable project – from start to finish.
Construction
As construction projects progress from planning to execution, the need for robust risk mitigation measures becomes an essential best practice. During the construction phase, the application of risk mitigation solutions takes center stage, offering real-time monitoring to identify risks sooner, together with actionable alerts and automations, to mitigate risks as they arise. IoT technology facilitates real-time job site awareness of potential incidents and empowers project teams to take immediate action to protect the project from major damage, rework, and delays. Whether monitoring temperature in a concrete pour, preventing curing issues, or detecting water leaks to mitigate catastrophic damage, IoT devices and data analytics play a pivotal role in enhancing job site productivity and protecting projects from major damage and claims.
In cold winter weather, the risk of water line freezing and pipe bursts poses a significant threat to construction projects. Similarly, severe weather events can lead to water infiltration causing significant damage. Ruggedized IoT sensors installed throughout the site can detect high-risk conditions and alert stakeholders to potential issues before they escalate. By preventing or mitigating unattended water flow damage and infiltration, which can result in multi-million dollar claims along with costly rework and schedule delays, IoT technology proves its value in safeguarding project margins.
Post-construction
As construction projects wrap up, analytics derived from risk mitigation technology offer a roadmap for continuous improvement and innovation in construction risk management. Here, the future trajectory of post-construction analytics and its significance in shaping the future of construction projects is outlined. By delving into this wealth of information, owners, developers and general contractors can gain invaluable insights into areas for improvement and refine risk management strategies for future projects. From identifying recurring damage incidents or close calls to pinpointing quality issues in project execution, post-construction analytics serve as a treasure trove of actionable intelligence.
The insights gained from post-construction analytics play a pivotal role in informing best practices in risk management strategies and positioning insureds for future insurance placements. They help identify the root causes of past incidents and near misses, enabling project teams to proactively address potential risks on future projects. Whether implementing enhanced IoT-enabled loss controls, optimizing construction practices or optimizing building design, post-construction analytics provide critical information for shaping the risk management landscape of future projects. By implementing lessons learned and demonstrating an improved risk profile, insureds can position themselves as better risks to insure and help bend the cost curve on insurance costs.
Throughout every phase of construction, from pre-construction to post-completion, the adoption of IoT risk mitigation solutions is essential for ensuring project success in an increasingly complex and challenging environment. By helping to de-risk projects upfront, IoT systems provide a path forward in securing preferred rates and deductibles. By preventing or discovering loss events sooner during construction, IoT systems mitigate costly damage, rework, delays and claims, lowering insurance costs and protecting profitability. By delivering valuable post-construction analytics, IoT systems help inform continuous improvement and drive best practices in construction risk mitigation.
Beyond the job site, the adoption of IoT risk mitigation technology carries broader implications, positioning risk managers in collaboration with tech providers, brokers and underwriters. Through collaborative partnerships, stakeholders can achieve shared goals of risk mitigation and project success, driving better outcomes for both the construction and insurance industries. By embracing innovation and leveraging the power of IoT solutions, stakeholders can proactively identify and mitigate risks, optimize project performance, and positively shape the future of construction.
