Sponsored: Liberty Mutual Insurance

Managing Construction’s True Risk Exposure

Mitigating construction risks requires a partner who, with deep industry expertise, will be with you from the beginning.
By: | November 2, 2015 • 5 min read

When it comes to the construction industry, the path to success is never easy.

After a long, deep recession of historic proportions, the sector is finally on the mend. But as opportunities to win new projects grow, experience shows that more contractors go out of business during a recovery than during a recession.

Skilled labor shortages, legal rulings in various states that push construction defects onto general liability policies, and New York state’s labor laws that assign full liability to project owners and contractors for falls from elevations that injure workers are just some of the established issues that are making it ever harder for firms to succeed.

And now, there are new emerging risks, such as the potential for more expensive capital, should the Federal Reserve increase its rates. This would tighten already stressed margins, perhaps making it harder for contractors and project owners to invest in safety and quality assurance, and raising the cost of treating injured workers.

Liberty Mutual’s Doug Cauti reviews the top three risks facing contractors and project owners.

“Our customers are very clear about the challenges they are facing in the market,” said Doug Cauti, the Boston-based chief underwriting officer for Liberty Mutual’s construction practice.

“Now more than ever, construction risk buyers – and the brokers who serve them – are leveraging our team’s deep expertise to find solutions for complicated risks. This goes way beyond what many consider the traditional role of an insurance carrier.”

Other leading risks facing contractors and project owners.

Given the current risk environment, firms that simply seek out the cheapest coverage could leave themselves exposed to these emerging risks. And that could result in them becoming just another failed statistic.

So what is the best way to approach your risk management program?

Understanding the Emerging Picture

Construction firms have been dealing with multiple challenges over the last several years. Now, several new emerging risks could further complicate the business.

After an extended period of historically low interest rates, the Federal Reserve is indicating that rates could rise in late 2015 or sometime in 2016. That would surely impact construction firms’ cost of capital.

“At the end of the day, an increased cost of capital is going to impact many construction firm’s margins, which are already thin,” Cauti said.

“The trickle-down effect is that less money may be available for other operational activities, including safety and quality programs. Firms may need to underbid and/or place low bids just to get jobs and keep the cash flow going,” Cauti said.

SponsoredContent_LM“Now more than ever, construction risk buyers – and the brokers who serve them – are leveraging our team’s deep expertise to find solutions for complicated risks.”
— Doug Cauti, Chief Underwriting Officer, Liberty Mutual National Insurance Specialty Construction

“Experience shows us that shortcuts in safety and quality often lead to more construction defect claims, general liability claims and workers’ compensation claims,” Cauti said.

Currently, the frequency of worker injuries is down on a national basis but the severity of injuries is on the rise. If those frequencies start creeping up due to less robust safety programs, the costs could grow fast.

And if this possible trend is not cause enough for concern, the growing costs associated with medical care should have the attention of all risk managers.

“Five years ago medical costs represented 56 percent of a claim,” said Jack Probolus, a Boston-based manager of construction risk financing programs for Liberty Mutual.

“By 2020, that medical cost will likely grow to 76 percent of an injured worker’s claim, according to industry experts,” Probolus said.

Rising interest rates and rising medical costs could form a perfect storm.

Focusing on the Total Cost of Risk

For risk managers, the approach they utilize to mitigate the myriad of existing and emerging risks is more important than ever. The ideal insurance partner will be one that can integrate claims management, quality assurance and loss control solutions to better manage the total cost of construction risk, and do it for the long term.

Liberty Mutual’s Doug Cauti reviews the partnership between buyers, brokers and insureds that helps better manage the total cost of insurance.

In the case of rising medical costs, that means using claims management tools and workflows that help eliminate the runaway expense of things such as duplicate billings, inappropriate prescriptions for powerful painkillers, and over-utilization of costly medical procedures.

“We’re committed to making sure that the client isn’t burdened in unnecessary costs, while working to ensure that injured employees return to productive lives in the best possible health,” Probolus said.

The right partner will also have the construction industry expertise and the willingness to work with a project owner or contractor from the very beginning of a project. That enables them to analyze risk on the front end and devise the best risk management program for the project or contractor, thereby protecting the policyholder’s vulnerable margins.

“We want to be there from the very beginning,” Liberty Mutual’s Cauti said.

“This isn’t merely a transaction with us,” he added. “It’s a partnership that extends for years, from binding coverage, through the life of the project and deeper as claims come in and are resolved over time,” he said.

In other words, it’s a relationship focused on value.

Today’s construction insurance market – with an abundance of capacity – can lead to new carriers entering the market and/or insurers seeking to gain market share by underpricing policies.

“We see it all the time,” Liberty Mutual’s Cauti said.

Where does this leave insureds? Frustrated at pricing instability, or by the need to find a new carrier.  And wiser, having learned the wisdom of focusing on value, that is the ability to better control the total cost of risk.

“Premium is always important,” notes Liberty Mutual’s Cauti. “But smart buyers also understand the importance of value, the ability of an insurer to partner with a buyer and their broker to develop a custom blend of coverages and services that better protect a project’s or contractor’s bottom line and reputation. This is the approach our dedicated construction practice takes.

Why Liberty Mutual?

For more information on how Liberty Mutual Insurance can help assess your construction risk exposure, contact your broker or Doug Cauti at [email protected].

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.




Liberty Mutual Insurance offers a wide range of insurance products and services, including general liability, property, commercial automobile, excess casualty and workers compensation.

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The Profession

For This Pharmaceutical Risk Director, Managing Risk Means Being Part of the Mission to Save Lives

Meet Eric Dobkin, director, insurance and risk management, for Merck & Co. Inc.
By: | September 28, 2018 • 5 min read

R&I: What was your first job?
My first job out of undergrad was as an actuarial trainee at Chubb.I was a math major in school, and I think the options for a math major coming out are either a teacher or an actuary, right? Anyway, I was really happy when the opportunity at Chubb presented itself. Fantastic company. I learned a lot there.

R&I: How did you come to work in risk management?
After I went back to get my MBA, I decided I wanted to work in corporate finance. When I was interviewing, one of the opportunities was with Merck. I really liked their mission, and things worked out. Given my background, they thought a good starting job would be in Merck’s risk management group. I started there, rotated through other areas within Merck finance but ultimately came back to the Insurance & Risk Management group. I guess I’m just one of those people who enjoy this type of work.

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R&I: What is risk management doing right?
I think the community is doing a good job of promoting education, sharing ideas and advancing knowledge. Opportunities like this help make us all better business partners. We can take these ideas and translate them into actionable solutions to help our companies.

R&I: What could the risk management community be doing a better job of?
I think we have made good advancements in articulating the value proposition of investing in risk management, but much more can be done. Sometimes there is such a focus on delivering immediate value, such as cost savings, that risk management does not get appropriate attention (until something happens). We need to develop better tools that can reinforce that risk management is value-creating and good for operational efficiency, customers and shareholders.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?
I’d actually say there hasn’t been as much change as I would have hoped. I think the industry speaks about innovation more often than it does it. To be fair, at Merck we do have key partners that are innovators, but some in the industry are less enthusiastic to consider new approaches. I think there is a real need to find new and relevant solutions for large, complex risks.

R&I: What emerging commercial risk most concerns you?
Cyber risk. While it’s not emerging anymore, it’s evolving, dynamic and deserves the attention it gets. Merck was an early adopter of risk transfer solutions for cyber risk, and we continue to see insurance as an important component of the overall cyber risk management framework. From my perspective, this risk, more than any other, demands continuous forward-thinking to ensure we evolve solutions.

R&I: What’s the biggest challenge you’ve faced in your career?
Sticking with the cyber theme, I’d say navigating through a cyber incident is right up there. In June 2017, Merck experienced a network cyber attack that led to a disruption of its worldwide operations, including manufacturing, research and sales. It was a very challenging environment. And managing the insurance claim that resulted has been extremely complex. But at the same time, I have learned a tremendous amount in terms of how to think about the risk, enterprise resiliency and how to manage through a cyber incident.

R&I: What advice might you give to students or other aspiring risk managers?
Have strong intellectual curiosity. Always be willing to listen and learn. Ask “why?” We deal with a lot of ambiguity in our business, and the more you seek to understand, the better you will be able to apply those learnings toward developing solutions that meet the evolving risk landscape and needs of the business.

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R&I: What role does technology play in your company’s approach to risk management?
We’re continuing to look for ways to apply technology. For example, being able to extract and leverage data that resides in our systems to evaluate risk, drive efficiencies and make things like property-value reporting easier. We’re also looking to utilize data visualization tools to help gain insights into our risks.

R&I: What are your goals for the next five to 10 years of your career?
I think, at this time, I would like to continue to learn and grow in the type of work I do and broaden my scope of responsibilities. There are many opportunities to deliver value. I want to continue to focus on becoming a stronger business partner and help enable growth.

R&I: What is your favorite book or movie?
I’d say right now Star Wars is top on my list. It has been magical re-watching and re-living the series I watched as a kid through the eyes of my children.

R&I: What is the riskiest activity you ever engaged in? When I was about 15, I went to a New York Rangers versus Philadelphia Flyers game at the Philadelphia Spectrum. I wore my Rangers jersey. I would not do that again.

Eric Dobkin, director, insurance & risk management, Merck & Co. Inc

R&I: What is it about this work you find most fulfilling or rewarding?
I am passionate about Merck’s mission of saving and improving lives. “Inventing for Life” is Merck’s tagline. It’s funny, but most people don’t associate “inventing” with medicine. But Merck has been inventing medicines and vaccines for many of the world’s most challenging diseases for a long time. It’s amazing to think the products we make can help people fight terrible diseases like cancer. Whatever little bit I can do to help advance that mission is very fulfilling and rewarding.

R&I: What do your friends and family think you do?
Ha! My kids think I make medicine. I guess they think that because I work for Merck. I suppose if even in a small way I can contribute to Merck’s mission of saving and improving lives, I am good with that. &




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]