Risk Report: Construction

Boom Risk and Opportunity

An ongoing shortage of experienced labor threatens the construction industry on multiple fronts.
By: | November 1, 2017 • 6 min read

September, the City Council of New York voted unanimously to approve a bill requiring workers on most construction projects to participate in at least 40 hours of safety training.

Advertisement




A building boom in the nation’s largest city was accompanied by a rise in the number of fatalities: eight so far this year; 12 in each of the two previous years, but only eight total in 2014.

Across the country there are calls for large infrastructure projects. But builders, along with their brokers and underwriters, are worried about several troubling trends. Fewer young people are entering the building trades as the industry grays. Diversity also is a stubborn challenge.

The new law in New York is one large step — among many efforts across the country — to address the issues.

“We are glad these questions are being asked,” said Gary S. Kaplan, president of North America Construction at XL Catlin. “We have been asking these questions or years, and I am just starting to feel a little better about the answers, at least what we hear from the larger contractors. We are seeing fewer claims that are related to traditional safety issues.

“Kaplan has written extensively on demographics, recruiting, safety and training, including an essay on his firm’s website. Older workers, despite their expertise and safety training, face an increased likelihood of injury, he said.

“Ask any actuary,” Kaplan wrote. “Older workers are more prone to injury than younger ones. It’s just a biological fact. They’re especially susceptible to soft-tissue injury. Worse, the older the worker, the longer soft-tissue injuries can take to heal.”

The other risk is less obvious, but it’s every bit as debilitating for the industry, said Kaplan. It’s part of a massive shift in the demographics of the construction industry and the U.S. economy: retirement.

“While an injury might never happen — retirement will.”

According to the Social Security Administration and Pew Research, Baby Boomers are reaching retirement age at the rate of nearly 10,000 per day.

Construction occupations make up roughly 10 percent of the total labor force in the U.S. If representation is proportional, that means about 1,000 construction workers reach retirement age every day.

Benefits of Diversity

Diversity is part of the answer, said William B. Noonan, executive vice president and industry leader for North American construction at brokerage Willis Towers Watson.

“Diversity is tied to the talent shortage. The more diverse your recruiting, the better you are able to recruit from across the whole talent pool,” said Noonan.

Workforce management and talent optimization was one of the megatrend challenges identified in the white paper “Deconstructing Risk,” the Willis Towers Watson 2017 Construction Risk Index.

Advertisement




It also matters in winning contracts. “Before you can put people to work, you have to win work,” Noonan added.

“Proposals will only get you an interview with an owner to present your ideas and answer questions. You have to show up for those looking as diverse as the clients you hope to work for.”

The same is true in insurance. “For most lines of coverage, underwriters are going to be looking at your past performance,” said Noonan.

“They are going to look at your loss metrics, but you are going to have to tell your story in person. I was previously a chief risk officer and we would always look at our own losses, our own story, before going to the underwriters.”

“Diversity is tied to the talent shortage. The more diverse your recruiting, the better you are able to recruit from across the whole talent pool,” — William B. Noonan, EVP and industry leader for North American construction, Willis Towers Watson

Internally and externally it all comes down to how a company presents and represents itself. Better selected, more diversified workers are also easier to train, especially for highly skilled trades.

“One thing that worries me is that first-line supervisors are having to spend more time training than on supervising work,” Noonan lamented. “That directly affects construction defect claims. You can trace supervision to quality assurance and quality control.”

He also is concerned that the recent string of natural disasters, from earthquakes across Mexico to hurricanes along the U.S. Gulf Coast and in the Caribbean are “putting a very big strain on an already thin pool of construction workers.

“Where people go will be about who offers the best pay and conditions, and which workers are willing to travel.”

Much rebuilding to be done in many places at the same time will draw new workers, but that goes directly back to the challenges in training and supervision. “The more front-line supervisors are diverted from their primary purpose, the more QA/AC, project completion times and budgets are directly affected. It goes hand in hand,” said Noonan.

Stephen Buonpane, senior vice president of construction at Chubb, concurred.

Gary S. Kaplan, president, North America Construction, XL Catlin

“Construction companies facing a shortage of skilled labor need to know that a lack of proper training and experience could lead to an increased likelihood of worker injuries, resulting in higher workers’ compensation and potentially general liability losses,” said Buonpane.

Any increase in workers’ comp claims not only increases costs associated with the project but could also lead to reputational concerns and project delays, Buonpane added.

“However, increased workers’ comp claims are not the only liability associated with construction sites.

“For instance, if construction sites aren’t properly maintained and controlled — especially in densely-populated areas such as New York City where there has been a boom of construction activity over the past four years — construction companies are exposed to third-party liability if their [work] injures a person or property outside the construction area.”

Further, the shortage of skilled labor also can affect the quality of construction and increase the loss exposure on the project post-construction.

“Construction companies need to be aware that if there are construction defects due to poor building quality, there could be liability losses down the road. And depending upon what has been built, those losses could be in the tens of millions of dollars,” Buonpane cautioned.

Advertisement




Kaplan at XL Catlin said he sees signs of improvement. “I was traveling recently and there was a construction project next to my hotel. I saw a guy flying a drone with a laser sensor. There was another driving an automatic compactor by a remote joystick controller. There also are 3D surveys and digital monitoring for level, heat and water.”

The key is engagement at all levels, Kaplan stressed.

“Construction companies are making more of a career path, from supporting shop classes in high school, to return-to-work paths as part of the worker’s comp process.

It’s important to grasp that an injury doesn’t necessarily mean having a worker totally sidelined. Studies have shown that injured workers are more likely to experience better health outcomes when a return-to-work plan is in place, said Kaplan.

“You have to be proactive to move the needle,” he said.

“On workers’ comp, you don’t want people to practice retirement. They might get good at it.”

Similarly on diversity, it takes active effort. “Equal opportunity is not sufficient. You have to push. It’s more than just wanting it. The better companies are stepping forward, but there is a long way to go.

“In gender, for example, of 10.3 million construction workers in the country about only 9 percent are female. I think that is the lowest of any major industry group.” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

Advertisement




That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

Advertisement




Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]