How IoT can benefit insurers during construction
The unmistakable sound of gushing water, flooding into hallways and units with expensive finishes, is a huge headache not just for developers and general contractors of high-rise construction projects, but also for insurers. Water damage at job sites creates big problems for everyone involved, especially in the later stages of construction and commissioning.
Whether it’s a burst pipe, leak, or water infiltration, mitigating water-related risks during construction requires collaboration between all involved parties to align on protection requirements and put effective risk mitigation plans in place. But how can you effectively safeguard your project(s) against this kind of threat?
In recent years, construction Internet of Things (IoT) technology has seen increased adoption, proving disruptive not only in its ability to monitor and mitigate job site risk, but also in generating productive conversations among project stakeholders about its value. This is a promising development, as technology adoption and new approaches to construction risk management have traditionally been hindered by siloed discussions between insurers, brokerages, and insureds.
By harnessing the power of IoT and data analytics, insurers and insureds can mitigate a variety of project risks during the construction process to protect project margins and unlock shared value.
Actionable IoT data
Construction IoT devices offer immense opportunity for insurers and insureds when it comes to understanding and mitigating risk at the job site. Generally characterized as smart sensors that can be strategically deployed during construction and into post occupancy, IoT technology enables users to receive real-time project data, alerts, and historical reporting without ever having to set foot at the job site. This is achieved through wireless connected devices, which relay data from these smart sensors up to the cloud. Integrated with a software intelligence layer, these platform solutions provide data analytics, allowing users to evaluate and understand their project risk exposure in real-time and over the course of a job. This supports risk mitigation efforts that can result in more competitive, risk-adjusted coverage terms and reduced insurance costs.
The benefits of construction IoT do not end with water mitigation. The technology is providing actionable data, alerts, and reporting on a broad range of job site risks involving noise, adverse weather conditions, vibration, and building materials (such as concrete and mass timber), as well as worker safety and fire watch. These advancements are enabling users to mitigate the cumulative impact these risks have on high-rise projects in terms of potential damage and rework, schedule delays, construction financing costs, and insurance claims related to Builder’s Risk, Delay in Start Up, and Wrap Up Liability policies.
For developers and contractors, investment in construction IoT technology means they reduce risk, drive productivity, and enhance safety at their job sites, making their projects more attractive to insurers.
Bridging the gap
The benefits of such technology are still not widely understood by most insurers and insureds. Construction technology providers, working together with insurance brokerages, carriers, and managing general agents (MGAs), are uniquely positioned to help bridge the education and alignment gap between insurers and insureds. These individuals play a key role in educating stakeholders on the capabilities, benefits, and limitations of available solutions, sharing best practices and results from construction IoT deployment, and helping develop technology-based risk mitigation plans that are tailored to the project, optimizing for risk reduction and cost of deployment. By proactively aligning with carriers on minimum or preferred protection requirements to inform the development of risk mitigation plans, technology providers help insurers and insureds save valuable time and reduce transaction costs in placing coverage, while lowering risk for all parties.
More than ever, understanding how IoT technology works, aligning on applications that add value in reducing risk, establishing best practices in IoT adoption at the job site, and standardizing minimum protections must be addressed. Joining these priorities with underwriting requirements are critical to enabling efficient risk review, preferred coverage terms, and better outcomes for all parties. In the absence of collaboration and alignment on tech adoption between parties, both insurers and insureds are subject to increased project risk, higher transaction costs, and value left on the table in the form of returns and project margins.
This approach to enhanced communication, collaboration, and shared value, enabled through the adoption of construction IoT technology and data-driven underwriting, is proving successful in producing better outcomes for project stakeholders. These developments are ushering in a new era of positive disruption, value creation, and new insurtech business models as the worlds of construction and insurance become increasingly digitized.
If the gap between insurers and insureds is to be closed, both groups would do well to consider how construction IoT can be integrated into projects and underwriting practices to proactively mitigate risk and generate shared value.
