Today, the construction technology market is flooded with different tools. In fact, in 2020, early stage construction tech funding was $374.9 million, while late stage funding was $417.4 million; then in 2021, early stage funding increased to $738.3 million, and late stage funding reached $1.1 billion.

This increase in options is challenging contractors to determine which ones are right for them. While it’s not a bad problem to have, too many choices can complicate successful adoption. As contractors are still dealing with some pressing issues that may have previously stood in the way of adoption like an aging workforce, talent shortage, notoriously slim profit margins, etc., more contractors are seeing realistic opportunities to turn to technology to help address these issues.

This article covers the different types of construction technology and common challenges that come with adoption.  

The Rising Cost of Risk  Sidebar

A key driver of technology adoption is the rising cost of risk, as construction insurance premiums continue to increase with some lines of coverage, including cyber, property, and excess liability, experiencing double-digit increases.

While rate increases are driven by several factors, there is also a social inflation trend. Social inflation is the rising costs of insurance claims above and beyond what can be explained by the overall inflation rate. A recent study found that social inflation increased claims for commercial auto liability alone by over $20 billion between 2010 and 2019.

As a result, some companies may choose to retain more risk, as they are also looking more closely for ways to prevent or minimize losses. Telematics or in-cab cameras, for instance, have proven to be valuable loss prevention tools that also provide supportive data in claims management. For any company with a fleet of vehicles, such innovations can help control rising commercial auto rates and the potential for costly lawsuits, among other things.  

Consider the case of Chalk Mountain Services, a transportation leader in the oilfield services industry. The company decided to implement video-based safety solutions, including inward- and outward-facing cameras and alerts for speeding, following too closely, and distracted driving. As a result, the company saw an 86% decrease in preventable accident costs, a 43% decrease in worker’s compensation costs, and a 15% improvement in driver retention.

Recognizing Technology’s Value in Risk Management

Technology adoption today is where construction risk management was two decades ago.  Contractors understood that managing risk was the path to better business results and, while it took years to achieve cultural buy-in, shared best practices, and a collaborative forward approach to risk management industry-wide, many companies now have a risk manager, if not an entire department dedicated to risk management.

Contractors need to follow the same path for technology. When it comes to risk management, the benefits of technology can be viewed in three different categories.

Loss Prevention

Loss prevention technologies include internet of things (IoT) devices that prevents a risk and averts a loss altogether. An example of IoT devices include water mitigation technology, which sends an alert when there is an anomalous flow and senses a potential leak, allowing contractors to shut off a valve, even remotely, ultimately staving off a potential larger loss.  

Given insurance loss data over the past decade, water damage has become a leading cause of builder’s risk claims. Construction insurers are vested in helping contractor clients find the highest level of risk-reducing technology that can help prevent a costly company loss.

Loss Reduction

Using the water mitigation example, many homeowners buy sensors or “pucks” that sit around home appliances like hot water heaters, dishwashers, and washing machines, and an alarm and notification are sent when water hits the device. Since the water is already leaking, a loss has resulted, but because the owner was alerted, a larger loss is avoided.

These technologies change the outcome of the risk and can have a positive impact on risk management, including buying insurance. If water mitigation is going to be implemented in a construction project with a valve that allows quick shut it off, then it’s likely that water losses are going to be fewer and less severe and boost a contractor’s risk profile, perhaps even having a positive impact on builder’s risk policy terms and premium.   

The implementation of technology can help insurance underwriters grow more comfortable with tougher construction risk.