Construction Industry

Tech Challenges for Surety

As technology becomes more integrated into construction, surety underwriters need more comfort and clarity.
By: | May 23, 2017 • 2 min read

Technology’s integration into every aspect of our lives makes organizations increasingly vulnerable to some sort of cyber flaw.

This is true for the construction industry, and it has led to surety bonding working to incorporate technology as both a source of information and a factor in underwriting.

“We are seeing a blurring of the lines between commercial and contract in the surety world. Contract surety used to be just sticks and bricks,” said Joseph Perschy, director of strategic operations, Argo Surety. “Commercial surety covered everything else.

Joseph Perschy, director of strategic operations, Argo Surety

“But as tech has become more integrated into construction, underwriters can’t just do one or the other anymore. With smart buildings, the underwriters need clarity through the general contractor to the subcontractors installing the systems.”

Argo Surety, part of the Argo Group, provides contract and commercial surety bonds to a variety of businesses and industries in all 50 states. Argo Surety also offers U.S. Customs bonds through a partnership with C.A. Shea & Co.

“Clearly the buck stops with the underwriter,” said Perschy, “but the brokers and the contractors have roles as well. Contractors need to be clear with underwriters on their comfort level with technology, their capabilities and the expertise of their subcontractors.”

If things do not go well, “the contractor is going to be responsible for reimbursing the surety,” noted Perschy.

“Now that is not necessarily crippling; that actually is what the bond is for. The surety steps in, then goes back to the contractor. But that makes it harder and costs more money and time.”

To enable insurance companies and sureties to incorporate work-in-progress statements from contractors and subcontractors in their underwriting, a broad coalition is working to develop a format with XBRL US, the standards organization for financial data.

According to XBRL, developers are assessing input from the first public-comment period that closed recently, and will consider a second such period over the summer or into autumn.

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Separately, XBRL is also developing a new data standard for solar energy in a project with the U.S. Department of Energy. First fruits are not expected until 2018.

The U.S. chapter of XBRL, an international organization, is one of about two dozen national standards groups. The acronym stands for “eXtensible Business Reporting Language” and was originally developed as a financial data standard. It is used by public companies in reporting to the Securities & Exchange Commission, as well as by banks filing with the Federal Deposit Insurance Corp.

The effort to establish standards for contractors and sureties started in 2015. XBRL reported that a proof-of-concept project was completed with The Hartford, and that Liberty Mutual is also participating.

“We are now trying to engage other underwriters and contractors,” added Michelle Savage, vice president of communications for the 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.

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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.

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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]