Producers deeply invested in the property/casualty market would do well to target potential clients in the construction industry, particularly those operating in the private, residential space.
That’s the message from Insurance Information Institute President Robert Hartwig’s presentation this week at the Association of General Contractors Surety Bond and Construction Risk Management Conference.
Hartwig, an economist considered the “go to” authority on insurance trends, said the construction sector is “critical to the economy [and] the P/C insurance industry,” and pointed out that while private construction activity is still well below levels prior to the financial crisis, it is moving at a positive, upward clip.
In fact, the value of new private construction reached $659.4bn last year, with residential construction growing 16.6% from November 2012 to November 2013. Lodging, commercial and transportation also grew impressively last year, with 32.7%, 20.7% and 18.3% increases, respectively.
“[This] bodes well for early 2014,” Hartwig said.
That positive growth is reflected in demand for appropriate insurance policies, a recent report from Marsh found. Demand increased for builders risk insurance in 2013 and renewal rates for the sector were 2.9% higher in 2013’s third quarter.
Pricing for residential construction insurance lines also increased between 3% and 7% last year, Marsh found, translating to greater commissions for associated producers.
Kevin Krupka of Denver-based Mountain Insurance Brokers saw these trends play out well for his agency, leading him to label construction as the market with the biggest potential for growth over the next few years.
“The economic recovery has helped, particularly in Colorado,” Krupka said. “One of our clients has $30mn in construction projects over the next couple of months. A few years ago, that wasn’t the case.”
Public sector construction is still flagging, however, Hartwig noted. The value of construction activity in the public sector actually decreased 0.2% from November 2012 to November 2013.
Hartwig attributes the trouble to “state and local government budget woes.”