The following content is sponsored by McGriff.

How could an armload of critical intelligence impact your next project? Well, the more risk analytics you have at your fingertips, the smarter and safer your construction projects will be. A firm grasp on all available data from the past allows you to successfully navigate around risk challenges you may face in the future. Read on to understand the key pieces of our analytics process and learn about a few situations where our construction clients’ businesses were all the better because of it.

One of the first, and most important, things to do is to gather loss information to see what needs to be done to get to where you want to be. Loss data helps generate extremely insightful reports that provide a clear picture of how things are currently working and where improvements can be made.

From here, it’s time to dig into the minutia of risk analysis—all the details that must not be overlooked. Identification of trends, whether good or bad, enables you to see clearly and make highly informed and strategic decisions that can have a dramatic impact on your business.

1: Experience Modification Analysis

It’s important to verify the accuracy of your Mod worksheet accuracy and perform a full diagnostic evaluation, which can in turn help transform a list of losses into a Claims Management and Risk Control action plan to lower your Mod in the future. Forecasting future Mod ratings can also allow for more immediate EMR solutions such as payroll reclassifications and case reserve reviews.
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CASE IN POINT:  RISK ANALYTICS

In 2021, a major construction contractor approached their service team regarding a substantial increase in their recently updated EMR. They expressed concerns of this increase as it related to the impact on their competitiveness, as well as ongoing qualification for various public projects. The client executive engaged the risk analytics teammate to perform an analysis of factors impacting the dramatic increase in EMR.

The analysis by the risk analyst revealed the EMR was being affected by two factors: 1) decreasing expected loss factors (ELFs) in their state of operation, and 2) misclassification of payroll among various class codes. After reviewing the analysis with the client, McGriff initiated an effort to correct the misclassification of prior year audits, and to obtain agreement from the current and prior carriers to issue revised payroll audits to NCCI for the purpose of obtaining a revised production of the EMR.

RESULT: The client’s initial EMR, as issued in 2021, improved by .24 compared to the forecasted EMR for late 2022—a dramatic improvement for our construction client.
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2: Historical Loss Analysis

Conducting an in-depth review of your historical loss experience provides insight into trends in loss frequency and severity, the types of losses/exposures having the greatest impact, and where future risk management efforts might be beneficial. 

3: Risk-Financing Analysis

The application of loss-forecasting techniques, which utilize both individual loss experience and aggregate industry experience, provides projections on retained-risk costs at varying retention levels to help you make the most informed decision possible as to how to structure the retentions within your program.

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CASE IN POINT: RISK FINANCE

As a result of a renewal strategy meeting with a McGriff construction client executive engaged team members from Risk Finance and Risk Analytics to perform a review of the overall risk financing structure of the client's program.  Historically, they had maintained separate casualty programs for different operating divisions—each company with their unique retention level.  As a result, similar operating companies had major variances in their risk transfer costs, as well as their Total Cost of Risk profiles.  Additionally, the management of the program was cumbersome, which resulted in increased management time and resources.

Working with Risk Analytics and Risk Finance members of the McGriff Construction team, they began exploring alternatives that would simplify the program and provide more cost-effective risk financing overall. Reporting back to the client, McGriff recommended a consolidated approach with a single insurance partner that would simplify their program and provide greater flexibility for future growth. Further, they recommended to the client that they establish a single entity captive, to utilize for funding of operating company retentions. This strategic move provided the flexibility to select different levels of retention individually.

RESULT: The client moved to the consolidated risk financing program for all operating companies and proceeded with the establishment of a captive to fund internal retentions. The result was a simplified consolidated program, providing greater flexibility for retention levels, and growth of operations.

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4: Industry Benchmarking

Coverage and Limit Benchmarking reports help you compare your insurance program to industry peers to assist in determining adequate limits and competitive pricing as well as provide better insight into the relative underlying loss experience driving total cost of risk.

5: Reserve/Collateral Evaluations

On a periodic basis, an analysis of outstanding loss reserves and IBNR reserves for prior years allows better negotiation on any outstanding collateral on deductible programs to better manage your credit program.

6: Total Cost of Risk Analysis

Your Total Cost of Risk Impact report quantifies the total risk management costs inside your business and distinguishes risk financing and administrative costs from those associated with insurance losses and identifies opportunities for future cost savings.

7: Cost Allocation Support

When several profit centers, each with unique exposures, exist under the umbrella of a single insurance program, the task of allocating costs (especially retained-risk costs) in a way which is both fair and feasible can be difficult.

8: Actuarial Studies

Actuarial consultants provide another level of decision support by analyzing past loss experience and estimating future performance. Actuarial estimates might include estimates of booked reserves, pricing of excess layers, modeling of confidence levels, captive feasibility, and many others.

9: Casualty Analytics

The analytical processes below are a few very insightful ones that you will want to consider implementing when reviewing losses and crafting an effective mitigation strategy:

• Loss Stratification & Analysis: This process involves a historical review of your loss experience, and identification of losses within various dollar segments. The key benefit of this analysis is that it enables you to make a more effective deductible selection.
• Loss Projections: Similar to the Loss Stratification & Analysis, this process entails a historical analysis of losses, allowing you to see losses per $100 of payroll based on actuarial projections.
• Incidence Rate Analysis: This analytical process allows you to zoom in on historical Incidence Rates based on OSHA formulas and reported data for the purpose of benchmarking, and trend analysis.

I hope this has been a helpful look behind the scenes of risk analytics. We’d be glad to partner with your company to show you how our people and processes can effectively manage your risk and enhance your business processes and bottom line.

About McGriff Construction

As one of the largest and most progressive construction risk management and surety firms in the U.S., our mission at McGriff Construction is to provide intelligence, innovation, knowledge, and insight to our clients that leads to custom solutions to effectively mitigate their risk. With an impressive team of over 95 dedicated construction risk management, safety management, and claims specialists, we’re poised to address all of the challenges that come with the construction process.

Who We Serve

• General Construction
• Civil/Infrastructure
• Energy
• Demolition
• Highway Construction
• Excavation and Site
• Concrete
• Mechanical
• Electrical
• Industrial
• Crane and Rigging
• Steel Erection

What We Provide

• Construction Risk Management
• Surety Services
• Captive Solutions
• Controlled Insurance Programs
• Construction Risk Control
• Analytics & Actuarial
• Claims Consulting
• Employee Benefits

 Our approach begins with understanding your needs and goals.

Contact Dave Nichols at dnichols@mgriff.com or visit mcgriff.com to learn more.