Skip to main content
Survey Report

Construction Marketplace Realities 2019 – General Liability (GL)

Insurance Consulting and Technology

March 29, 2019

Combined ratio results are top of mind as underwriters evaluate rate adequacy. The window to discount GL is closing and we can expect closer scrutiny ahead. General Liability Rate Forecast: Flat to +10%

Rate predictions

  Trend Range
General Liability Rate Forecast: No change or slightly up Flat to +10%

Key takeaway

Combined ratio results are top of mind as underwriters evaluate rate adequacy. The window to discount GL is closing and we can expect closer scrutiny ahead.

Carriers are becoming vocal about the sleeping giant that is GL and beginning the push for rate. Emerging trends in loss activity demonstrate an adverse shift in premises and operational risk results, which have typically been overshadowed by those of traditional “long tail” completed operations.

Accordingly, carriers are beginning to tighten their respective appetites, pushing for best-in-class risks as well as extensive underwriting data and engineering information.

  • Combined ratio results remain top of mind as underwriters evaluate rate adequacy. Well-publicized challenges in auto liability have made general liability subject to several cycles of suppressed pricing to help offset. However, during this time, legal expenses have continued to rise, plaintiff verdicts are reaching unprecedented outcomes and CAT losses are putting pressure on carrier portfolios. The window to discount GL is closing, and we can expect closer scrutiny ahead.
  • Construction companies are diversifying operations more than ever with mergers and acquisitions activity on the rise in tandem. Whether it is a push for vertical integration, offering turnkey solutions or expanding capabilities to include design-build services, construction firms are exploring ways to fortify client relationships. Insurers are cautiously receptive to these broadened operations, actively seeking greater understanding of their scope. Without proper due diligence with a carrier, insureds could face policy restrictions, change in risk retention or perhaps the need for stand-alone coverage.
  • Comprehensive underwriting information is more critical than ever to success in the renewal process — including but not limited to thorough descriptions of newly formed and/or acquired entities, loss experience and historical exposures. Carriers are increasingly employing predictive modeling technology to drive underwriting decisions, thus making accurate exposure data imperative to achieving the best results.

Disruptors on the horizon:

  • Court decisions: Case law continues to produce land mines for general liability as states vary on fundamental coverage interpretations within the CGL policy form, including the trigger of an occurrence. In October of 2018, Ohio joined the fluid list of states to bar coverage arising from a subcontractor’s faulty work, even in the event a clarifying endorsement was purchased by the policyholder.
  • Wearable safety devices: Technology advances in “wearables” demonstrate tremendous potential to protect the workforce and ensure safe habits. However, these devices open the potential for new claims scenarios on the fringe of privacy infringement. Traditional GL policies have not truly been tested yet on this front.

New York update

The New York marketplace continues to harden for subcontractors, due to the increased size of payouts on Labor Law claims. Some carriers with historical experience in New York have either pulled away or restricted their overall program offering. In 2018, we experienced significant movement in the E&S space with new markets entering and others exiting the New York market for trade contractors.

Overall, there is no shortage of capacity, namely coming from the GL-only marketplace and less traditional companies, including E&S carriers and Lloyds of London.

The standard markets remain opportunistic by picking and choosing where they are going to play. Overall, carriers continue to seek mid to high single digit rate increases on their books of business. Certain standard markets continue to aggressively pursue “best in class” risks which can still obtain favorable terms on renewal. Regarding loss sensitive business, it will depend heavily on experience and loss information of the contractor. Contractors seeking a low deductible program continue to find themselves in the challenging landscape of the E&S space.

Contact Us