Managing Risk & Insurance Costs When it


comes to cost drivers in competing for construction contracts, the cost of insurance is one of those areas in which contractors want to see


predictability. All insurance is not created equal, and it depends on a variety of factors across multiple lines of insurance. Te good news for 2016 is that it


doesn’t appear that there are any “price spikes” in a particular line of insurance; however, the contractor needs to remain ever vigilant to manage their insurance costs. Workers’ compensation is one of


those areas where costs can get out of control if not managed properly. California is generally a high-cost state in which to do business. Workers’ compensation rates compared with the rest of the nation are higher. Tis year, there is likely to be a mixed bag on rates; however, the variation should not exceed a few percentage points. According to one insurance report “combined ratios for workers’ compensation carriers continue to improve,” although we are seeing a continuing trend toward litigation and disputes over medical treatment and the overuse of opioids (pain killers), which are driving up workers’ compensation costs. With this year being an election year,


we are likely to see legislation to increase workers’ compensation benefits, as well as legislation to loosen up existing system controls. Governor Brown generally has been a very good steward of holding down state costs. He also has a track record of vetoing workers’ compensation bills that needlessly expand benefits. Should legislation


4 March/April 2016


manage to pass the legislature, that is not a product of a compromise with the employer community, it would stand a fair chance of a veto. In the property and casualty area, it


appears that 2016 will be slightly flat, or potentially show a decline in rates. Tis is an area where insurance rates are likely to be more competitive. Like workers’ compensation insurance, it is also dependent on incident rates. How a contractor manages their risks overall from one year to the next can make a big difference. Insurers are becoming increasingly


savvy about managing high volumes of data to assist them in their under- writing practices. Data is power for any carrier today. Contractors need to become increasingly sophisticated about how they manage their own claims and determine trends and ways to avoid incidents. Safety programs have been a corner-


stone of all AGC contractors for many years; however, with the advent of increasingly sophisticated data analytics, contractors now have the power to shape their future costs without entirely being at the will of the marketplace. Te AGC Safety and Health


Council has worked tirelessly to protect and educate our employers about the benefits of a strong risk management program. For many of our member employers, the success of their risk management program has added to their profitability and employee health. Our package of insurance partners has further added value to our employers, but as stated above, this work is never done, as new legislation is always a threat to premium costs with no relative value to the employer or employees.


Published bi-monthly for members of the Associated General Contractors of California


3095 Beacon Boulevard West Sacramento, CA 95691 (916) 371-2422 www.agc-ca.org


Publisher


Al Rickard Association Vision (703) 402-9713 arickard@associationvision.com www.associationvision.com


Editor


Carol A. Eaton Eaton Communications (707) 789-9520 eatonc@comcast.net


Graphic Designer/Production


Carole Tieme Tieme Creative Media (410) 394-0326 carole@thiemecreativemedia.com www.thiemecreativemedia.com


Advertising Director


J. Michael Derda Association Vision (415) 883-7555 mderda@associationvision.com


Correspondence


Address editorial and circulation correspondence to: California Constructor, AGC of California, 3095 Beacon Blvd., West Sacramento, CA 95691 (916) 371-2422 or call Carol Eaton at (707) 789-9520 or eatonc@comcast.net.


Tom Holsman CEO, AGC of California


Copyright 2016


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