Agent Authority: Construction business owners remain optimistic despite being hit hard by COVID-19
2021 Nationwide survey reveals valuable insights for commercial insurance agents
Columbus, OH – After nearly a decade of continuous industry growth, construction business owners experienced severe declines to their companies’ revenue, project completions and new bids, and workforce, as the pandemic took hold in 2020. New Agent Authority research* from Nationwide revealed 7-in-10 construction business owners were negatively affected by COVID-19. And although a myriad of these challenges remain in 2021, most owners are optimistic about the strength of the upcoming peak season and their business’s ability to get back on track.
Nationwide’s research uncovered three key themes for construction business owners and the commercial agents who serve them:
- COVID-19 delivered unexpected blows to construction owners and exacerbated existing issues;
- Pragmatic business owners expect continued challenges, but are overall optimistic about the upcoming peak season; and
- Agents can increase their value to business owners now and position themselves for long-term growth.
“COVID-19’s impacts have brought new and existing challenges to the forefront for many construction business owners,” said Linda Stueber, Nationwide’s Senior Vice President of Middle Market Commercial Lines. “As the industry recovers, agents can grow their influence by not only counseling clients on their protection needs for changing operations, but also by sharing expertise to help them run their businesses more effectively.”
COVID-19 heavily impacted construction business owners
Like many other industries, the construction industry battled direct and collateral effects from COVID-19:
- 70% of construction owners were negatively impacted by the pandemic, experiencing the biggest hits to total revenue (52%), their company’s ability to bid on new projects (45%), and their workforce/employee headcount (37%).
- The pandemic also emphasized the need for increased planning, as more than 1-in-5 business owners lacked plans to help their businesses operate through economic uncertainty:
- 27% didn’t have proper plans in place to successfully navigate project site shutdowns/re-openings.
- 24% didn’t have a business plan to account for a potential recession.
- 23% didn’t have enough employees or subcontractors to meet project demand.
Business owners share optimism, despite lingering challenges in 2021
Most construction business owners said they accelerated new strategies or re-evaluated areas of their business to account for the pandemic’s impacts – nearly 90% changed their operations for business continuity or increased efficiency. In many cases, the tightening labor market has also forced them to relax screening criteria for new hires. In fact, 70% of business owners said they have, will or may relax new hire screening criteria and drug testing practices to account for a lack of qualified candidates.
Near-term uncertainty is strong among owners as 79% are worried about meeting their 2021 revenue goals and 76% fear lower customer demand due to an economic recession. Despite their concerns, however, 84% of owners are optimistic about the strength of the 2021 upcoming peak season and their business’s preparation to meet increased demand.
- 85% of construction business owners have changed at least one of their insurance policies, but three-quarters are still worried about having the right policies in place to protect their business.
- While concerns remain, owners believe the economy and their company’s performance will increasingly improve over the next year:
- In the next 6 months, 48% believe the economy will improve and 67% believe their revenue will improve.
- In the next 12 months, 60% believe the economy will improve and 75% believe their revenue will improve.
Proactive agent outreach can lead to strong, long-term relationships
With the anticipated uptick in business over the next year, construction-focused independent agents have a prime opportunity to proactively reaffirm their ability and counsel business owners through operational changes and new exposures. Even more, assisting owners to implement new plans that protect against future threats, such as increased cyber or COVID-related liability exposures, is essential as the industry begins to rebound.
The survey results also uncovered that construction owners have a high level of trust for their agents, as many reported leaning on their agents to guide them through the challenging market conditions:
- 89% of construction owners trust their insurance agent’s guidance and feel they can build a relationship over time.
- 87% said their agent regularly checks in to make sure their policy is adequate for their needs.
- Half of business owners engaged their agents over the last 12 months to:
- Discuss or review their coverage (54%)
- Create a business plan to address COVID-19’s economic impacts (51%)
- Improve their business’s safety and loss control efforts (50%)
“Construction owners are looking to build long-term relationships with the agents who serve their businesses,” said Stueber. “By opening a dialogue now to hear their client’s business needs and share expertise and counsel in the short-term, agents can build stronger long-term relationships to be prepared to implement that counsel when construction owners are confident their business will improve.”
Business owners shared strong interest in receiving more resources and guidance from their agents, including:
- Regular policy reviews (46%)
- Information on the latest trends in their industry (43%)
- Updates on cyberthreats and cybersecurity measures (36%)
- Agents serve a vital role in helping construction clients understand the impacts evolving operations may have on their coverage or risk management needs. Nationwide’s Commercial Insight Center helps agents stay up-to-date on complex industry trends and offers resources to educate clients on topics like the importance of finding good subcontractors or benefits of creating an effective risk transfer program.
- Highlight the importance of business planning with construction clients to prepare for the unexpected. Work with carriers who specialize in construction risks and have dedicated loss control teams to serve the construction industry on-site and virtually. www.mylosscontrolservices.com offers virtual services, guidance for developing business continuity plans, and share-able resources to control exposures, such as strategies for protecting idle construction projects, preventing falls from heights, or dealing with effects of extreme weather patterns.
*These insights and more were uncovered through Nationwide’s ongoing Agent Authority research series, which includes samples of independent insurance agents, various business owners, and consumers. Previous Agent Authority research reports: Agent-customer relationship; Small business owner needs and challenges; Agents' top concerns through the pandemic; Consumer and business owner cyber preparedness; Business’ growing interest in telematics; Consumers’ adoption of telematics.
Nationwide commissioned Edelman Intelligence to conduct a 20-minute quantitative online survey among a sample of 200 U.S. middle market construction business owners between January 5 – January 14 to explore the actions business owners have taken as a result of COVID-19, understand their outlook on the 2021 peak season and the challenges they’re facing, and gauge their experience working with insurance agents and buying or renewing insurance policies. For the purposes of this survey, middle market construction business owner was defined as anyone who self-reported as being a sole or part owner of a construction company with either 25-500 employees or $10M-$500M in revenue or 20+ fleet vehicles. As a member of CASRO in good standing, Edelman Intelligence conducts all research in accordance with Market Research Standards and Guidelines.
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