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What to Expect in 2024
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What to Expect in 2024
After several tough years of supply chain disruptions, higher business costs, job delays and budget uncertainty, the construction industry is booming. However, several persistent issues could hinder growth: worker shortages, labour costs, rising inflation and jobsite safety. Strong employee benefits and risk management programs will be the framework for building a successful 2024.
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Economy, employees and a changing environment could hammer profits.
Growth in manufacturing, transportation and government investments will continue to drive construction despite a decreased demand for new residential builds. Construction sector output is expected to decline 3.4% by the end of 2023, with residential construction dropping the most significantly by about 15%. However, commodity prices are stabilizing, copper prices have dropped 5.5% and the government’s commitment to building the country into an industrial hub point to positive signs ahead.
But high interest rates, elevated inflation and worker shortages are causing project stoppages and cancellations, squeezing profits.
In addition, severe weather events have caused construction delays and insurability problems, particularly in locations with exposure to hurricanes, wildfires, convective storms and earthquakes. Canada experienced more than 20 weather-related disasters in the first nine months of 2023 — surpassing last year’s record of 15 — leading to CAD$2 billion in losses already this year.
The interest rate environment and tighter credit conditions are likely to result in private construction activity slowing in 2024, while inflation and volatile
pricing for key materials will make it especially difficult to accurately bid longer-term projects and could depress profits. This economic environment has dampened consumer demand for new single-family homes, causing some homebuilders to pivot from traditional “for-sale” builds and enter the “build-to-rent” market.
Three in five Canadian construction respondents to the HUB International 2024 Outlook Executive Survey cite economic issues and unpredictability as challenges to profitability in 2024. To remain profitable in this difficult and shifting climate, construction firms will need to focus on proper valuations — not just for projects but for equipment — and ensure their insurance coverage is adequate.
Construction firms that prioritize risk management and take steps to place themselves as a best-in-class risk will be best positioned to weather the challenges ahead.
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Emerging Technology
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Enhance worker recruitment and retention with personalized benefits.
Attracting skilled construction workers remains the top challenge for the industry. Older construction workers are retiring or scaling back their work — about 20% of Canada’s construction workers are expected to retire in the next decade. And fewer young people are interested in taking up construction as a career.
Even presuming construction spending slows in 2024, the industry will still need to hire nearly 300,000 new workers next year to meet demand.
The dearth of workers — and the loss of institutional knowledge from construction workers leaving the profession — has made maintaining the health and safety of labourers even more imperative. While most construction companies prioritize safety, the construction industry continues to report more workplace injuries than any other sector. And the problem isn’t going away: Falls constituted nearly a quarter of all workplace injuries between 2010 and 2021.
Under the watchful eye of the Canadian Centre for Occupational Health and Safety (CCOHS), construction firms will still need to maintain a positive safety reputation to attract workers. Forward-thinking firms are identifying and addressing safety concerns before work on a site begins and creating their own training programs to prevent accidents.
The competition for skilled labour is forcing construction companies to offer benefits and financial incentives to differentiate themselves. Health benefits are becoming more common in the industry and many construction firms are also offering robust employee assistance programs, mental health benefits, retirement plans and financial wellness programs.
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Reduce the risk of costly construction claims with strong risk management.
The COVID-19 pandemic taught the construction industry valuable lessons, from how to respond to business disruptions to improved balance sheet management. However, it’s impossible to remove all the risk in construction, with threats to resiliency looming from many different directions.
Contentious costs, change in scope and workmanship deficiencies account for a significant number of construction claims each year. Extreme weather delays impact 45% of construction projects worldwide each year, costing the industry billions in additional expenses and lost revenues. And with inflation driving up the price of materials, cost overruns will likely proliferate in 2024.
With supply chains still in disarray from the pandemic, construction companies also must take steps to secure products much earlier. One HUB client bidding on a project purchased US$1 million of HVAC units in advance of a project and faced the challenge of not only storing them but insuring them until they could be installed.
Despite these threats to resiliency, most construction insurance lines are seeing downward rate pressure, and overall rates are holding steady with average increases
As the construction industry copes with the changing economic climate and insurance marketplace, more companies are viewing risk strategically to hedge against threats to their resilience. For example, a construction company with a well-capitalized captive could take a loan from the captive to alleviate a temporary cash flow issue.
Firms that identify and address problems before they occur and can leverage their insurance program as a source of contingent capital will improve their long-term resilience and results. An experienced broker can help construction firms evaluate their insurance for adequate limits and gaps and provide the necessary risk management resources to support the company’s strategic goals.
Resiliency
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New technologies can help maximize safety and productivity — but risk remains.
From how projects are designed to improving jobsite safety and efficiency, technology will continue to play a significant — and growing — role in the construction industry.
Many firms are investing in data analytics, artificial intelligence, the internet of things (IoT) and telematics to increase safety and improve efficiency. But the industry’s increased use of technology has made it more vulnerable to cyberattacks that could disrupt business operations and bring building to a halt.
The cyber insurance market has moderated, with rates expected to rise less than 10% in 2024. Although new entrants to the cyber market have created significant competition and tamped down prices, increasing claims and ransomware activity could push up rates.
Many construction firms continue to underestimate their cybersecurity exposures and forgo adequate
coverage. Nearly 85% of Canadian construction respondents to the HUB survey cited cybersecurity risks as a potential threat to their company’s profitability in 2024, but only 68% were prepared for the risk.
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HUB construction insurance, risk management and employee benefits specialists will work with you to develop a tailored strategy that will protect the bottom line, support your workforce and build resiliency for 2024. Here are some initial considerations:
Develop a comprehensive risk plan.
Making risk management the centrepiece of your organization’s culture can help you identify exposures and devise the right response in case of an incident. Make sure your broker understands how to strategically approach risk and identify gaps in your insurance program.
Create a personalized benefits strategy.
Continue to focus on workplace safety.
Be transparent with your broker.
Continue to focus on workplace safety.
Be transparent with your broker.
Develop a comprehensive risk plan.
Construction companies are competing for a dwindling pool of experienced labour. Personalized benefits based on HUB’s Workforce Persona Analysis and data analytics can help companies distinguish themselves from the competition. Creating a quality employee experience (QEX) will boost engagement, improve recruitment and retention and promote worker wellbeing.
Create a personalized benefits strategy.
Safety is already the focal point of your operation, but with more retirees and new workers stepping onto jobsites for the first time, injury risks increase. Review your safety program and procedures at least annually and seek help from a risk professional to address any issues.
Continue to focus on workplace safety.
Develop a comprehensive risk plan.
Create a personalized benefits strategy.
Be transparent with your broker.
Consistent communication with your broker will help you identify and mitigate issues in advance of your next renewal and position your organization in the best light. Review exposures and insurance needs at least 90 days prior to policy renewal to allow your broker to find the optimal mix of coverage for your organization’s needs.
Be transparent with your broker.
Develop a comprehensive risk plan.
Create a personalized benefits strategy.
Continue to focus on workplace safety.
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When you partner with HUB, you’re at the centre of a vast network of experts who will help you improve your profitability, enhance the vitality of your workforce and remain resilient into the future. For more information on how to manage your insurance costs, reduce your risk and take care of your employees, talk to a HUB construction advisor. We’re here to help.
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1. Research and Markets, Canada Construction Market Size … 2023-2027, September 2023.
7. Toronto Sun, “Job vacancy rate in construction could hit record high,” September 8, 2023.
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Explore insurance alternatives
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The construction industry will need to hire nearly
next year to meet demand.
delays impact 45% of construction projects worldwide each year.
2. On-Site, “Positive outlook for Canada’s construction industry,” August 29, 2023.
8. WorkSafe Saskatchewan, “2023-2028 Fatalities and Serious Injuries Strategy,” accessed October 30, 2023.
3. Canadian Underwriter, “Where 2023 Cat losses stand after summer storms,” September 20, 2023.
4. Engineered Systems, “Construction Sector Reflects Economic Uncertainty,” May 30, 2023.
9. Consulting.ca, “Canada better than average in avoiding construction claims and disputes,” October 16, 2023.
5. HUB’s 2024 Outlook Executive Survey polled 900 C-Suite and VP-level executives on the issues facing them on profitability, employee vitality and organizational resilience.
10. Forbes, “New Tech Helps Construction Battle Extreme Weather and Labor Disruptions,” March 17, 2022.
6. CBC News, “Construction labour crunch leaves Canada in need of boosting ranks of home builders,” July 14, 2023.
of 1% to 5%. However, rising inflation will result in valuation adjustments and gross receipt changes that could drive up premium rates in the future. Construction firms involved in large value projects may see elevated rates for course of construction insurance because of the number of insurers required to secure adequate coverage.
One HUB construction client set up its own in-house university to train new workers. This strategy not only created a pipeline of skilled workers, but it also allowed the firm to instill a culture of safety in the new workforce, reducing accidents and workers’ compensation claims.
Although offering alternative insurance and personalized benefits options to employees can improve recruitment and retention, only about one-third of Canadian construction respondents to HUB’s survey currently offer such benefits.
However, construction firms that develop a benefits strategy based on personalization will create a quality employee experience (QEX) that enhances engagement, boosts recruitment and retention and improves overall employee wellbeing. Starting small, such as polling workers on the benefits they want and need, and then gradually introducing benefits solutions will still have a meaningful impact
on the workforce.
A specialized construction broker can help construction firms assess emerging risks and cyber protection and provide resources to mitigate those exposures.
One obstacle to acquiring enough cyber insurance is the underwriting process itself. A new HUB client, a large contractor, had several US$500,000 cyber claims in the past and wanted to secure US$5 million in coverage. But before a carrier would agree to insure that limit, the contractor had to prove it was taking adequate steps to reduce its cyber risk through multifactor authentication, cybersecurity training and protocols, and a solid backup strategy.
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