Aon is a professional services firm that helps clients navigate volatility, build resilient workforces, and access capital. They’re also a major intermediary in the insurance industry. Tariq Taherbhai is a leader within Aon’s Global Construction & Infrastructure specialty, where he works closely with other construction specialty leaders within Aon to ensure clients are provided with the analytical tools, capital and insights they need to make better decisions.
Tariq has done a lot of work and research examining infrastructure technologies — also known as “infratech”— and the implications for their use in construction insurance. I recently had a conversation with him about this topic.
Josh Kanner (JK): Thanks for talking with us, Tariq. First, could you explain what “infratech” means, and what aspects of it are relevant for construction?
Tariq Taherbhai (TT):
It’s a term that has a pretty broad scope, essentially any technology that has an effect on or can be useful to the design, construction and operation of infrastructure. For construction, in particular, infratech can help in quality and worker safety, which are the same areas where we see among the most claims and loss activity for construction insurance. More specifically, in the U.S., among the biggest losses are in worker injuries and water damage. Another material source of loss is poor schedule outcomes and there is infratech that can now help contractors better manage schedule risk.
JK: Can you dive a bit deeper into a few examples of infratech-enabled solutions for construction?
TT: Sure, the potential for infratech to reduce water damage, for example, has gotten a lot of attention. It’s one of the largest sources of damage from a property perspective, responsible for billions in costs each year in the U.S. There are now several technology companies providing sophisticated water leak detection services. Safety is naturally a big focus for infratech, because lives are at stake, and it’s a major factor in determining insurance risk. Newmetrix plays in this area, of course, but it also includes technologies like wearables that check workers’ location, alert management of a fall, or let workers know they are entering a hazardous area. There are also applications for location mapping, concrete curing, better crane operation — it really runs the gamut.
JK: So are contractors primarily interested in infratech as a way to reduce risk?
TT: Definitely, but there’s a lot of potential for more than just using infratech for risk reduction. It can improve productivity and efficiency by providing real-time data and analytics about all facets of construction. There’s a lot of opportunity. Penetration is still fairly low across construction, but adoption of infratech is sharply increasing by members of AEC.
JK: Tariq, some of our customers are telling us that they’re using our data to “arm their brokers” to get preferential rates or terms from insurers. What advice do you have for contractors to best prepare their brokers to equip them to get the best possible terms from their carriers?
TT: That experience is not unique. Clients using advanced, proven technologies that address a key risk area, like safety, have a better story to tell insurers than their peers because they can demonstrate that they are a lower risk to the carrier. The key is to make sure that the risk management team and the CFO understand how the data from infratech such as Newmetrix shows that you, as a client, are at a reduced risk compared to other companies. That way, they can share it with their broker and insurers to make their case and successfully negotiate a better rate.
JK: It makes financial sense that a contractor would find value in infratech to help them reduce risk to avoid incurring losses. At Aon, you work closely with a lot of insurers. What do you see as their interest in infratech? I imagine paying out fewer claims is part of it.
TT: Right. While the value to contractors is substantial, there is an equally compelling value proposition of infratech to insurers. Once insurers have enough relevant data from infratech, they’ll be able to accurately model, price and underwrite to give those contractors who leverage infratech more accurate terms and conditions.
For example, AXA XL’s North America Construction insurance business is building tailored insurance programs and services for construction projects that qualify as a “Highly Protected Project” (HPP) because of their implementation of technologies designed to reduce project risk.
And then there's the Hartford’s IoT Innovation Lab, which is using the adoption of connected devices to reduce the potential for loss by using the data they generate to raise risk awareness and improve safety conditions. Hartford is explicit in stating that the data from the connected devices should eventually help create “equitable premiums for safer customers, usage-based coverage, tailored risk intervention programs and improved claims handling.”
JK: We’re working with AXA XL and The Hartford, ourselves. In fact, The Hartford is paying for pilot projects of Newmetrix for their customers. If readers want to know more about the Hartford Innovation Lab and this program, I’d direct them to our website that outlines how to get involved.
Construction companies are starting to adopt these technologies at a pretty rapid clip. Once they achieve a critical mass, what do you think the effect on the commercial insurance market for construction will be?
TT: It will be profound. My view is that eventually, insurance will demand infratech on projects. Eventually, insurance underwriting will demand access to the data being generated from infratech to make better underwriting decisions. Those that don’t have it will only be able to obtain coverage on terms that are not competitive.
Construction isn’t alone in this regard. Auto insurers, for example, are using telematics data from devices and vehicles to make underwriting decisions.
So, I envision a future where, just as you have an app on your phone that determines how much you save on your car insurance, we’ll have something like that for construction as well.
JK: I can almost hear some of our readers thinking, “Why on earth would an insurer lower or keep rates flat, especially since they’ve gone up by 10% or more every year I can remember? Wouldn’t they lose money?” How would you respond to that?
TT: It’s a good question, and the answer is that insurers, like other companies, are equally interested in profit as they are in gross revenue. If a certain technology is proven to reduce an insurer’s losses — by cutting the number of annual recordable incidents in half, or by removing expensive friction from the claims payment process, for instance — then they can make an even greater profit even if they keep premiums flat. Put another way, infratech will help insurers lower some of their significant cost drivers, which will help make them more profitable.
JK: So what’s your advice to construction companies, given the future you see for infratech and commercial insurance?
TT: If you’re not already looking into and piloting infratech, do so now. The laggards who put off infratech adoption will find themselves at a serious competitive disadvantage in the insurance lifecycle if they don’t have the right technologies in place ahead of time.
Want to learn more about how predictive-based safety can help your company obtain a better rate with your insurer? Download our infographic "Tackling Insurance Premiums With Predictive-Based Safety”.
Want to learn more about Newmetrix?
