The Construction Job Site of Today: Risks and Opportunities
December 14, 2022 | Webinar
The construction industry faces a dynamic and evolving risk landscape. With an increased reliance upon electronic data and an expanding array of operational exposures, contractors and risk professionals have much to navigate. At the same time, technology-driven innovation is creating exciting new opportunities for the industry to thrive. We had an insightful discussion on the construction job site of today and explored risk management, technology and insurance solutions to help leaders stay ahead in times of change.
What did we learn? Here are the top takeaways from The Construction Job Site of Today: Risks and Opportunities.
Travelers brings decades of depth and expertise to the construction industry. “I have the great privilege of working with a team of more than 900 who dedicate every day to specializing in construction risk,” said Lisa Morgan, President of Construction, Energy and Marine at Travelers. Supporting thousands of customers in the construction industry for more than 30 years, “we insure across a broad spectrum of hazards, means and methods, and materials,” she said.
“Unprecedented unpredictability” has tempered optimism about an industry bounce back. While total construction spending is approaching pre-pandemic levels, shortages of labor and materials, increasing costs, project delays and budget pressures present obstacles on the road ahead. “Construction companies need every edge,” Morgan heeded. “A slowdown in the economy would inevitably translate to a drop in construction work. The question is, when, and timing is just harder in this industry. There are factors unique to construction… which cause many construction segments to lag behind the performance of the broader economy by months.”
The industry is responding to labor shortages with creativity, while promoting diversity. Construction job openings remain at an all-time high. “Recent studies indicate that 88% of contractors say they are having a hard time filling skilled trade positions, even with increased pay,” noted Morgan. But “the industry is responding with creative ways to attract new workers” that Morgan believes are also helping to diversify its workforce. “The share of women in construction is the highest it’s ever been,” she said. Chase Leist, Director of Insurance & Risk Management for HITT Contracting, concurred, noting how her company, which is woman-led, is “calling to grow the industry, to support women, minorities and differently-abled individuals to join the construction industry.”
Data analysis is a powerful tool to help mitigate risk and optimize efficiency. “There's all this data and understanding about what's happening on a construction site. Unlocking that data can enhance underwriting, to better differentiate and price risk,” said Danny Seigle, VP of Fintech at Procore. Leist agreed, noting how her company is working to create “a thoughtfully and strategically integrated platform that allows us to have more actionable insights, which helps us proactively manage risk and gain efficiencies.”
Tech adoption is on the rise. Seventy-five percent of our webinar audience said they planned to accelerate their pace of tech adoption in 2023. “This is very encouraging,” said Seigle. “Industry leaders, as they face more and more challenges, have the need for more solutions and are adopting technology as part of the solution. But it’s always an iterative and improving process. You can’t do everything all at once. It’s a tidal wave that will continue for 2023 and beyond.”
Risk control is at the heart of Travelers’ evaluation of emerging technologies. Travelers’ Innovation Team works with industry experts to “curate technologies focused on driving meaningful impact to our customers’ ability to improve safety, productivity and profitability,” Morgan shared. “Using a consistent approach to exploring, testing and learning about the innovation platforms out there for the construction industry,” she explained, is a strategy that helps us to confidently determine which technologies should “rise to the top.”
Managing tech risk is a matter of testing — and failing — safely. “We are constantly looking for ways to elevate the business of building,” said Leist. Speaking from HITT Contracting’s Co|Lab, where the company experiments and tests new materials, methods and technologies for construction, she explained how her team is able to work out the kinks before deciding whether or not to deploy a solution. “Our corporate philosophy is to test R&D on ourselves first, and then share with the market to help drive industry change… which gives us a chance to test things out and fail safely, thereby helping us mitigate third-party risk.”
Recession-proofing is a matter of portfolio diversity over backlogging. Leist emphasized the importance of having a portfolio of thoughtfully selected projects to withstand economic ebbs and flows. “We want to make sure we’re diversified, so we don’t have any one particular segment of the industry that is the full scope of our revenue base,” she explained. Quality over quantity is key. “There’s a tendency in construction to just put backlog on the books, whether it’s a good opportunity or an appropriate project type for the company, which could result in bigger risks down the road,” she said. “Being really thoughtful about not taking on work that really isn’t in our wheelhouse is another way to avoid future risks related to the potential downturn.”
Presented by the Travelers Institute, Master's in Financial Technology (FinTech) Program at the University of Connecticut School of Business, MetroHartford Alliance, Connecticut Business & Industry Association and the Big I Minnesota.
Text, Wednesdays with Woodward (registered trademark) Webinar Series.
A coffee cup sits next to a laptop on a desk. Text, Travelers Institute (registered trademark). Travelers. Joan Woodward appears on a video call.
JOAN WOODWARD: Good afternoon, and thank you for joining us. I'm Joan Woodward, and I'm honored to lead the Travelers Institute, which is the public policy division and educational arm of Travelers. Welcome, once again, to Wednesdays with Woodward. We're here for our 32nd webinar of 2022. And this will be our last one, folks, for the year. We're going to see you in January, on January 11th, as we kick off 2023.
But before we get started today, I'd like to share our disclaimer about today's program.
Slide, About Travelers Institute (registered trademark) Webinars. The Wednesdays with Woodward (registered trademark) educational webinar series is presented by the Travelers Institute, the public policy division of Travelers. This program is offered for informational and educational purposes only. You should consult with your financial, legal, insurance or other advisors about any practices suggested by this program. Please note that this session is being recorded and may be used as Travelers deems appropriate. Travelers Institute (registered trademark). Travelers.
Slide, Wednesdays with Woodward (registered trademark) Webinar Series. The Construction Job Site of Today: Risks and Opportunities. Logos, C.B.I.A. UCONN School of Business, M.S. in Financial Technology. Travelers Institute (registered trademark), Travelers. MetroHartford Alliance. Big I Minnesota (registered trademark).
I'd also like to thank our webinars partners today that have been with us all year long, so the Connecticut Business and Industry Association, the Master’s in FinTech Program at UConn School of Business, MetroHartford Alliance, and the Big I of Minnesota. So OK, let's get started today, folks. The construction industry today faces a dynamic and evolving risk landscape. With an increased reliance on electronic data and expanding array of operational exposures, contractors and risk professionals have much to navigate in today's society.
At the same time, technology-driven innovation is creating exciting, new opportunities for this industry to thrive. We have three amazing speakers today who are going to break it all down for us and share their views on risk management, technology and insurance solutions. We're going to kick things off with opening comments from our speakers, and then we'll bring it back all together for a discussion and, importantly, your questions. So use that Q&A feature throughout the session at the bottom of your screen to submit any questions, and I'll try to take them as we move through our program today instead of waiting until the end.
Slide, Speakers. Pictures of Joan and three other people. Text, Joan Woodward, E.V.P., Public Policy; President, Travelers Institute; Travelers. Lisa Morgan, S.V.P.; President, Construction, Energy and Marine; Travelers. Danny Seigle, V.P. of Fintech, Procore. Chase Leist - Director, Insurance & Risk Management; HITT Contracting.
So I'm thrilled to introduce our three speakers. First, Lisa Morgan, who is my friend and Senior Vice President at Travelers and President of our construction, energy and marine businesses. In this role, Lisa works with underwriting and service professionals to deliver expertise and insurance products and services to our customers in construction, oil and gas, renewable energy, and inland and ocean marine industries. That's a lot, Lisa.
So since joining travelers in 2012, she's held a variety of leadership roles, including Vice President of Specialty Practices and VP of Business Insurance Product Lead. Lisa brings tremendous amount of expertise to Travelers and to the industry. And prior to her career in insurance, she served as a trial attorney. Lisa, thanks so much for your leadership and joining us today.
Next up, we have Danny Seigle, who is Vice President and Procore, which offers sophisticated project management tools for all types of construction projects. In this role, Danny serves as a leader in Procore's fintech efforts, focusing on financing, insurance and payment solutions for the construction industry. Danny is passionate about improving access to working capital and level setting risk. He started his career in technology consulting at Bain, helping tech companies transition to the cloud. And he's held numerous other roles in business development and global partnerships.
Next up, we have Chase Leist. Chase is Director for Insurance and Risk Management at HITT Contracting, one of the largest general contractors in the United States. The company has been in business for 85 years and takes on lifecycle and construction services from small projects to high rises and corporate campuses. Chase oversees all risk management and functions, including insurance, surety, subcontract prequalification-- that's an important one-- and lots more. Over her 20-year career, she has served as a broker and risk manager and has worked on behalf of organizations at all stages in construction, including owner, developer, general contractor and trade contractors. Lisa, I'm going to turn it over to you now to kick off our program.
Lisa appears on the video call.
LISA MORGAN: Joan, thanks for featuring the construction industry on your last webinar of the year, and a special thanks to my co-panelists, Chase and Danny, who have graciously agreed to join me in today's conversation.
Slide, Travelers Construction, Energy & Marine: Who we are. A picture of three people in hardhats and safety vests, with a list of statistics laid over it. Text, 30-plus Years of Dedication to the Construction Industry. 5,400-plus Customers with Travelers Broad Product and Service Offering. 330-plus Underwriting/Marketing Professionals. 450-plus Construction Claim/Legal Professionals. 130-plus Construction Risk Control Professionals.
I thought I would set the stage with this first slide, which highlights the depth and breadth of expertise that Travelers brings to the construction industry. I have the great privilege of working with a team of more than 900 who dedicate their every day to specializing in construction risk. Many of our risk control and claim professionals, as well as our underwriters, have even come from the construction industry.
As a market leader for property and casualty insurance, we have been an active and stable market for contractors for more than 30 years. Over this time, we have evolved and deepened our expertise in the risks that our customers face as they procure projects and put work into place, from buildings to civil infrastructure, to associated craftwork, and so much more. About half of our team includes Risk Control and Claim partners. They are dedicated to advising our customers on how to manage risk or in helping owners, contractors and injured workers recover from insured losses.
The breadth of insight that we have in construction is a result of working with thousands of customers and distribution partners who also specialize in this industry. And that's just the team that I get to work with every day. We have construction experts in our small commercial and construction surety businesses and in lots of other parts of the enterprise. When you add it all up, it's over 50,000 customers that we insure across a broad spectrum of hazards, means and methods, and materials, which have all evolved over many economic cycles. And evolution will be the focus of our conversation today.
I'll start with some thoughts on macro trends impacting the construction industry, and then Chase and Danny will talk about how their companies are addressing these dynamic trends. Moving forward.
Slide, Macro Trends Impacting the Jobsite of Today. A picture of two people in hardhats looking at a computer monitor, and a bullet point list. Text, Headwinds, Slowing Economic Activity, Labor/Materials Shortages, Increasing Costs (Materials, Labor, Inflation). Tailwinds, Fed Government Investment additional spending, Work-In-Process (W.I.P.) Backlog, Reshoring Logistics/Supply Chains.
Macro trends, I spend a lot of my day talking to our agents and brokers and our customers about what's on their minds. These conversations reflect a great deal of optimism about what's ahead. Total construction spending is approaching pre-pandemic levels, and the federal government is primed to pump hundreds of billions of dollars into new infrastructure projects. But this optimism is tempered by shortages of labor and materials, increasing costs, project delays and budget pressures, all of which aren't likely to dissipate soon. Construction companies need every edge to manage through today's unprecedented unpredictability and to preserve their bottom lines.
In terms of headwinds, I'll start with the looming possibility of an economic slowdown. Opinions on whether or not the U.S. economy will head into a recession headline the news every day. A recent article in The Wall Street Journal stated that over 60% of economists see some chance of a recession in the next year. Yesterday's news reflected the lowest increase in consumer prices over the last 12 months. And now, attention turns to the Federal Reserve meeting today and a pending interest rate announcement.
So uncertainty is definitely a theme here when it comes to the impact of the economy on the construction industry. A slowdown in the economy would inevitably translate to a drop in construction work. The question is when, and timing is just harder in this industry. There are factors unique to construction, like backlogs, which I'll talk about shortly, which caused many construction segments to lag behind the performance of the broader economy by months.
There is more certainty, however, around other pressures the industry is facing, like supply chain issues. Pandemic-induced supply disruptions impacted a broad range of key construction materials from lumber to paint, steel and cement, causing material prices to swing wildly. As we've seen in many other industries over the last few years, the types of materials in short supply fluctuates. While 2022 has brought some relief, it's unlikely the issue of shortages will be resolved soon.
For a construction project, even a small delay in the arrival of materials or equipment can have significant ripple effects. Delays can lead to higher construction costs and lower profits. It can also stretch an already limited labor force between extended jobs and new jobs.
Speaking of labor, recent studies indicate that 88% of contractors say they are having a hard time filling skilled trade positions, even with increased pay. October data from the Bureau of Labor Statistics shows that job openings in this industry remain at an all-time high. The data interestingly also showed that the share of women in construction is the highest it's ever been, a proof point that the industry is responding with creative ways to attract new workers, from partnering with trade schools to attracting a more diverse workforce.
Given these forces at play, the cost of construction projects continue to rise. Construction material prices are up 16% year-over-year and not likely to come down soon as core inflation remains at a high. Rising borrowing costs, elevated material prices and equipment shortages remain real issues for contractors for the foreseeable future, which is a concern in terms of their ability to manage their financial risk.
In spite of all of these challenges, contractors remain optimistic, and here are a few reasons why. Through October, construction starts posted a 16% gain from a year ago. Continued growth in the construction segment will be fueled by legislation approved by the Biden administration, like the IIJA. In November of last year, President Biden signed the Infrastructure Investment and Jobs Act. The $1.2 trillion act will support investments in infrastructure, transportation and energy, and will span a 10-year horizon.
Over $550 billion will be specifically aimed at America's infrastructure, improving roads and bridges and making them safer. It marks the largest investment of its kind in a generation. The law will create new opportunities for contractors to continue profitably growing their businesses.
Other acts approved over the last year are poised to fuel growth in the construction sector also include acts like the Inflation Reduction Act, which has billions of dollars earmarked for clean energy infrastructure and improvements in existing infrastructure. And the CHIPS Act, which has about $50 billion earmarked to spur efforts to build semiconductor manufacturing facilities, which will increase the supply of memory chips and of jobs. These investments will pay out over an extended period of time, thereby giving contractors a stream of new job prospects for many years.
Healthy backlogs, our final reason contractors remain optimistic, backlogs represent months of work that contractors have won but not yet started. As I mentioned earlier, it provides a buffer for construction segments against a broader slowing of the economy. November data from the Associated Builders and Contractors reflects that construction backlogs are at historic highs. So these are many of the factors shaping the evolution I noted earlier as a key theme for this industry. Another factor is the implosion of technological advancements. Moving on.
Slide, Turning to Innovation in Construction. A picture of two people in hardhats looking at a laptop, and a list. Text, Construction industry slow to adopt technology. $3.8 billion, Catching up fast: Venture-backed Contech startups (Source: Crunchbase). Sorting through technology options is daunting. Carrier/Insured Test & Learn Collaboration.
If you look at the last several decades, interestingly, construction automation lagged. In fact, the Hartford Business Review historically had construction ranked as the second-lowest digital adopters next to agriculture. But all of that is changing. Venture-backed construction tech startups and funding are generating much of this momentum. We spend a great deal of time talking to our customers about the connected job site, while they are excited about the possibilities of leveraging technology to improve performance and worker safety through technology, but they are equally challenged by the time and resources required to sift through the many technologies and software vendors that are out there to understand really which are the best fit for them. Augmented and virtual reality tools, drones, wearable technology, it is now the internet of everything.
Our team at Travelers is very invested in thought leadership in this space. Several years ago, Travelers created an innovation team. They have been working with our construction experts to curate technologies focused on the goal of driving meaningful impact to our customers' ability to improve safety, productivity and profitability. This team uses a consistent approach to exploring, testing and learning about the innovation platforms out there for the construction industry.
Ultimately, this test-and-learn approach provides great insights out there to identify which technologies ultimately should rise to the top. We currently have an array of technologies in use and many others under review. Some of these are Travelers designed, and others are third-party designed.
Slide, Introducing the Travelers Innovation Network. A picture of a laptop displaying the Travelers website. Text, Showcase of new risk capabilities that can offer real value to our construction customers. Sharing the latest in technology-led solutions and insights. Featuring Travelers and Third-Party Services. Search by relevant risks by filtering via category. Bringing Travelers customers savings from across the network.
An example of this work is a new capability that we are excited to introduce exclusively to Travelers Construction customers called the Travelers Innovation Network. This service enables Travelers customers access best-in-class construction technologies that help contractors run safer job sites. From wireless alarm systems to wearable worker tracking, you can consider this a sandbox of innovation that you can access at a discount. More to come on these exciting services in early 2023. But for now, I'll hand it over to Chase.
Chase appears on the video call. Slide, HITT. A picture of three people in hardhats and safety vests at a construction site, and three bullet point lists. Text, Industry Concerns & Opportunities. Energy capacity, Cost escalation, Urgent need for sustainability, Support of disadvantaged and diverse businesses, Cyber and data security, Impact of compliance on operations. Elevating the Business of Building. Emerging materials and methods, Persistent evaluation of technology stack, Industry-shifting initiatives. Innovation Outside of the Tech Box. Growth of the industry by intentionally reaching under-represented populations.
CHASE LEIST: Thank you, Lisa. Yes, I would echo what you've just said about the many pain points that we deal with, many of which HITT sees as tremendous opportunities to disrupt and lead the industry in a new direction. As you said, we are optimistic. I would also add and reiterate some additional concerns we deal, which are the availability of energy capacity, cost escalation, urgent sustainability efforts and support of diverse and disadvantaged business partners as top concerns. These, along with data and cybersecurity and, from my lens as Risk Manager, the impact of compliance and documentation on the flow of operations, are top issues.
At HITT, we are constantly looking for ways to elevate the business of building. So that includes developing, evaluating and testing new and emerging materials and methods, leveraging technology, like you described, to support both the back office and the project itself, and always keeping an eye out for industry-shifting initiatives, such as the use of blockchain in contractual risk transfer and insurance compliance. We see a tremendous opportunity and call to grow the industry further to support women, minorities and differently abled individuals to join the construction industry. We have established employee resource groups to recruit, support and develop these employee populations. I am very fortunate that both HITT's CEO and General Counsel are both women, and I receive tremendous support from my leadership team in my role as Risk Manager.
Over the last two years, we've doubled down on our support of diverse and disadvantaged subcontractor partners through intentional recruitment and establishing ways to eliminate barriers, such as rolling out a twice per week subcontractor check run, so we get cash in hand to our subcontractor partners faster. We've undertaken formal and informal mentorships with our diverse subcontractor partners, and we've made strategic efforts to right-size bid packages, so we're providing a volume of work within the capacity that our partners can provide. We are always learning from our trade partners in their technical knowledge to upskill our teams and our partners throughout the ecosystem of the project to help address the need for skilled workers. On the next slide, I'll talk through another way we're driving innovation in the construction industry through our R&D efforts.
Slide, HITT's Co Lab. A picture of a multi-story building, and a bullet point list. Text, Corporate philosophy to test and understand firsthand, before bringing to the market. Physical space for research and development. Three goals of building Co Lab: 1. Design for disassembly, 2. International Living Futures Institute Petal Certification, 3. Net Zero Energy.
So here we have a picture of HITT's Co Lab, which I'm coming to you today from the Co Lab, which is our first-ever mass timber building. So Co Lab serves as HITT Contracting's designated space for the discovery, research and testing of new ideas. It's a space dedicated to inspiring innovation, bringing transformative ideas to life and evoking positive change in the built world, where collectively we can take intentional risks and find better ways to build. Our corporate philosophy is to test R&D on ourselves first and then share the prototype with the market to help drive the industry change.
Co Lab was really our first R&D project. We set out to achieve three core principles: design for disassembly, net-zero, and the International Living Future Institute Petal Certification. What that means is that Co Lab was built so that we could construct full-scale, spatial and building mockups for the testing of products and approaches. Design for disassembly means that the entire building can be taken apart, moved and reconstructed.
Remarkably, this particular building was installed by eight people over nine working days and can be fully disassembled and either recycled or reconstructed in another location. In addition, the building was designed for net-zero energy with a full solar canopy covering the roof and to achieve the ILFI Petal Certification, citing no Red List chemicals in the building. I encourage you to check out our website at HITT.com for more detailed information and our lessons learned.
By making this investment ourselves, this gives us a chance to test things out and fail safely, thereby helping us mitigate third-party risk. We wanted to create a space that gave us the opportunity to use the building as an experiment and test things before we engaged in research and development with our customers. This also allows us to create best-in-class processes from day one, which helps us deliver consistently across the enterprise no matter the type or size of project. These streamlined processes can be digitized and can collect data.
Along the thread of building for the future of the construction industry, we've tested and deployed robotics to take on dangerous and repetitive tasks, things such as working in a confined space. We want to try to keep our people safe and healthy.
Slide, Harnessing Data, a picture of three people in hardhats and safety vests at a construction site, with a bullet point list laid over it, and a flower-shaped graphic consisting of a circle in the center, with five other circles surrounding it. Text, Harnessing Data. Actionable enterprise-wide data, Risk Management solutions, Project Solutions. Text in the center circle, Actionable Insight. Text in the five surrounding circles, Project Data, Enterprise Data, Risk Data, Industry Data, and Economic Data.
So on the next slide, I'll talk about some of the investments we've made over the last few years in the areas of sustainable construction, virtual construction and project solutions.
Another way we've worked to disrupt the industry and improve our own risk management is to create some bespoke pricing software to gather real-time nationwide pricing data through our HITT pricing model, which we call HPM. Cost escalation, which, Lisa, you talked about, the cost of materials, the cost of labor, the cost of capital and, just generally, the overall cost of construction has increased dramatically over the last two years. Before we launched-- before we launched HPM in 2022, we had thousands of projects being priced on Excel spreadsheets. Now, we can capture all these different pricing efforts and have true visibility into the cost of drywall in California and the price of steel in Virginia and in one platform that allows us to inform our supply chain risk strategy. This also supports our project owners by helping them make sure the pro forma pencils out before they set their plans in place on their next investment in their next project.
We've also invested in software tools such as TrustLayer, which is spearheading the effort to move the industry towards digital compliance for effective contractual risk transfer. And then also water damage prevention tools, like WINT. One of our biggest challenges is to make sense of the entire enterprise worth of data that's captured daily in disparate systems. And to that end, we're well underway with what we refer to as our digital transformation.
We're working to bring all four corners of the enterprise into a thoughtfully and strategically integrated platform that allows us to have more actionable insight, which helps us proactively manage risk and gain efficiencies and a broader knowledge base. Thankfully, many years ago, we identified the need to streamline our project data, and we were an early adopter of Procore, which we've used since 2014.
Project management is, at its core, an effort in controlling variables, many of which can turn up as potential risks. Procore allows us to be proactive on these variables and give us the ability to respond thoughtfully and correctly. We onboarded 500 new team members in 2022. And leveraging technology to standardize our means and methods of our construction processes helps us deliver with consistency without burning out our teams, which in turn reduces our overall risk. This helps us avoid living in reactivity so we can be predictive and allocate resources appropriately.
Back in 2014, we saw the need to get project constituents informed on progress and enable project teams to get ahead of risks to schedule and budget. We used Procore's dashboards to involve owners in the construction process and facilitate decision-making. Procore provides us a built-in feedback loop with on-demand data and real-time reporting. One of the biggest benefits is that it integrates with many other systems so we can still maintain Procore as the single source of truth, avoiding extra work and maintaining a variety of technology solutions. The ability to have this transparency from a common platform for each project has enabled us to mitigate risk, achieve scalable growth and introduce new technologies in a structured environment. I'm going to pass the mic over to Danny to share more about Procore solutions.
Danny appears on the video call. Slide, Contractors Have Digitized to Ensure Performance. A graphic consisting of 5 hexagons containing text, a list titled Procore Construction Network, and a tiered list. A text list appears next to the graphic. Text list, Preconstruction, Simplify Your Planning and Deliver More Predictable Projects. Project Execution, Minimize Risk and Maximize Profit With a Centralized Platform. Workforce Management, Get the Most Out Of Your Workforce And Track Productivity. Financial Management, Move Projects Forward By Uniting Teams With Timely Financial Insights. Text in the hexagon list, Architects & Engineers, Owners, General Contractors, Specialty Contractors, and Material Suppliers. Text in the list titled Procore Construction Network, Preconstruction, Project Execution, Workforce Management, and Financial Management. Text in the tiered list, Partner Ecosystem, Connected Workflows Through Integrations and Services. Construction Intelligence, Decisions Based on Connected Data and Insights. The Procore Platform, Collaboration Across Unlimited Users and Apps, Secure and Trusted, Mobile and Web. Text on the bottom of the slide, Procore (registered trademark)
DANNY SEIGLE: Thank you, Chase. That is a great example of how contractors like HITT have digitized their operations to ensure project performance. My name is Danny Seigle. I lead the financial services arm at Procore. Years ago, people often said the construction industry won't adopt technology. At Procore, we had a different view. No one is building technology specifically for the construction industry.
We spent the last 20 years doing exactly that, with the mission of connecting everyone in construction on a global platform. Procore allows contractors to connect the entire project lifecycle from pre-con to closeout and everything in between. This connects the field and back office, enabling everyone to work on one unified platform.
Our 14,000-plus customers have invited 2 million-plus users to the Procore platform, where hundreds of thousands of construction companies collaborate together every day. Additionally, they leverage the Procore partner ecosystem consisting of 400-plus integrations to solve all kinds of workflows. As Chase mentioned, these are solutions like TrustLayer to automate the COI vendor compliance process and integrate the data directly back into Procore. This allows project teams to reduce rework, increase productivity and take control of project outcomes. On the next slide, we'll take a look at why the industry embraced technology.
Slide, Why Construction Leaders are Embracing Tech. A hexagonal graphic depicting a man looking at a clipboard in the center, surrounded by a text list. Text, Purpose Built for Construction, Solely committed to this industry and the success of its people. Easy Adoption, Our simple, mobile-enabled experience will get your team up and running fast. Open Platform, Build with confidence and unlimited users, where all your data, systems, and partners are connected. Best-in-Class Support, Including award-winning Professional Services, Customer Success and Unlimited Support. Actionable Insights, Gain a better understanding of your business with visibility across your people, process and profits. Agility, Plan, improve, and measure success while responding to opportunities and challenges in real time. Text at the bottom of the slide, Procore (registered trademark).
Today, builders are looking for tech that is solely focused on the construction industry, easy to adopt with mobile-enabled experiences that they can get up running fast. One hundred percent cloud-based, open platforms let them have unlimited users, unlimited data and connects everyone on a single platform. They want best-in-class customer support to make sure they're successful and the ability to unlock the power of their data to get the real-time insights they need, thus reducing project risks. On the next slide, we will take a look at the value contractors are seeing from leveraging this technology.
Slide, Technology Improves Operations and Reduces Risk, a list of data with graphics of charts and documents, a tractor, and a calendar. Text, 83% Agree that Procore has helped improve its overall quality control in order to deliver higher-quality projects. 8 days, Process and distribute R.F.I.s and Submittals 8 days faster using Procore. 75% agree Procore helps reduce rework on projects. 15 days, Finish projects 15 days ahead of schedule with Procore. Text at the bottom of the slide, Procore (registered trademark). All data is from the Procore R.O.I report, and reflect the opinions of the surveyed 2,687 Procore customers from around the globe. Data includes responses from general contractors, specialty contractors, and owners of all sizes.
A study this year, over 2,600 Procore customers found that contractors are seeing overall business performance improvements. Most notably, we've seen improvements in quality control, where 83% of respondents indicated technology is delivering higher quality projects. Submittals and RFI workflows are finalized eight days faster on average, and 75% reported reduction in rework.
Finally, customers report finishing projects 15 days ahead of schedule. All of these operational improvements translate into reduced project risk. Moreover, companies like Travelers have recognized that incentivizing technology adoption, and that is why Procore and Travelers have partnered together to give Travelers-insured customers 20% off their first year of Procore. On the next slide, we will take a look at the timeline of how the industry has digitized and where we are heading.
Slide, Construction Tech is Evolving to Fintech, a text list with graphics of a floorplan, a construction site, and a calculator. Text, Pre 2000s, Analog, Historical manual paper based workflows. 2000 - 2020, Mobile & Platforms, Digitizing all workflows and communicating. Generate data insights and build A.I./M.L. functions to improve workflows, reduce risk, and increase productivity. 2020 - 2040, Construction Fintech, Leverage insights and data from construction platforms to properly price risk and embed in-applications. Text at the bottom of the slide, Procore (registered trademark). Source: Construction Disconnected report F.M.I., F.M.I. Big Data Report.
Many of you probably remember the analog days where pen, paper, phone calls, even triple carbon paper were the technologies of the day. In the early 2000s, contact started, and it quickly progressed with the introduction of mobile devices and wireless networks unlocking connectivity on the job site. AI and ML functionality helped automate many workflows and increase productivity.
Along the way, a massive amount of data has been accumulated. To help put things in perspective, over 200 terabytes of data are generated on the Procore platform every month. Approximately 400 million documents, photos and inspection items were uploaded in 2021. And nearly 300 million invoices were submitted for approval.
We are now just starting what is likely a multi-decade journey of the convergence of construction technology and financial services, often called construction fintech. The insights and data from the construction software platforms are now being leveraged to level set access to working capital and better price and control risks on the project. On the next slide, we will discuss why this era of new construction fintech is so important and the massive opportunity.
Slide, Risk Evaluation is Difficult. Text, Construction is at the top of rankings you don't want to be on: 1. Longest days for payment. 2. Highest cost of capital. 3. Highest cost of insurance. All of this makes the lives of everyone in construction harder, more stressful, and riskier, while constraining the growth and advancement of the industry. It is time for this to change.
Risk evaluation and construction is difficult, especially as projects become ever more complex. You don't want to be a leader in the longest days till payment, highest cost of capital and highest cost of insurance. But the construction industry is. This makes the lives of everyone in construction more difficult and increases the cost for all stakeholders.
We believe technology can change this, and we are investing in building solutions to address these core industry challenges. Procore Pay was announced last month and will launch next year to streamline the payout process between general contractors and subcontractors. We have a new materials financing program, giving subcontractors 120-day payment terms to match their billing cycle, thus reducing the risk of default. Longer term, we have the opportunity to build custom risk scores to enhance insurance underwriting and give tech-enabled contractors the terms they deserve. On the next slide we will show how construction fintech will leverage three key advantages to provide an enhanced customer experience and unlock the terms builders deserve.
Slide, Construction Fintech Will Leverage 3 Key Advantages. Text, Direct Relationships, Embedding fintech products at the moment of need, often during precon. Data and Risk Intelligence, Proprietary data and risk scores that are nearly real-time, valuable for risk evaluation, and monitored to reduce claims. Bundling and Packaging, Provide more customer value by bundling relevant software products with financial services.
These advantages are direct relationships with builders, embedding financial services at the moment of need, usually during the pre-construction workflow, such as bidding and prequel, leveraging data and risk intelligence scores that are near real-time to better price and reduce risk. Lastly, bundling and packaging software and financial services together to create an enhanced customer experience and value. This will help reduce the total cost of risk and allow the industry to prosper.
Personally, I'm super excited about this new era of construction fintech, as we will be able to drastically improve the lives of everyone in construction and the communities they build. Feel free to visit procore.com/insurance to learn more, or reach out directly to myself. Looking forward to answering any questions, and I'll hand it back to Travelers.
The slideshow disappears, and Joan and the three speakers appear on the video call together.
JOAN WOODWARD: All right, Danny, thank you so much for that, and Chase and Lisa. It was just such a great kind of overview of what's going on in the industry, and how to think about it from an insured’s perspective, an agent and broker perspective. And we're going to get into all of these different segments as well. So first, as you all know, I like to turn the tables on the audience, and ask our audience some questions just to get a feel for what you're thinking.
So we have two questions today for our audience. And the first one, let's pull that up. And again, this is all voluntary. It's all anonymous. We're just kind of seeing what you're thinking. So which industry headwind are you most concerned about today: the slowing economy, labor and material shortages, the increased cost you're facing-- materials, inflation, labor-- the cost associated with the shortages, or the weather? We always worry about the weather. We're in insurance, after all. So let's take a look at this.
- So we have kind of-- I would say most people worried about inflation and shortages right now. The slowing economy as we all are living through, hopefully, will land on a soft landing. But the shortages and inflation-- and Lisa, is this kind of consistent with what you're seeing and hearing from your customers?
LISA MORGAN: Very consistent. Certainly, as I mentioned earlier, when I talk to our customers and agents about what's on their minds, a lot of those issues come up. Cost, certainly, an overriding theme, and certainly, with inflation at all-time highs, a note that comes up in every conversation I would say included in that though is certainly labor costs, as I mentioned earlier. Even as contractors are paying our skilled workers a lot more money, it's 5% increase year-over-year, they're still struggling to hold on to skilled workers.
So I'd say in terms of balance, cost, definitely, but I would say more so around labor. Ultimately, they can't get work done unless they have a stable and skilled workforce. That seems to be their biggest challenge in terms of what I hear day in and day out.
JOAN WOODWARD: Yeah, and Lisa, just for my time looking at the economic indicators, there seems to be about 3 million missing workers out there, because the labor participation rate is down from 2019. And also, we have two other-- as you know, two other factors that contribute to labor shortages, which is our low birth rate, a lot of our young people are getting married later or having less kids or not having kids at all. And then immigration seems to be continued pressure on the labor market. So I guess these labor shortages at least will be with us in the medium term. So, unfortunately, the outlook there doesn't seem to be subsiding on the shortages.
OK, audience let's go to the next question, and this is looking at technology. So what pace of your technology adoption, what does it look like in 2023? So in your companies where you work, are you accelerating, where your ROI has been strong, accelerating, but you're playing catch up? No change, it will be flat from this year's, or decelerating. And this is in terms of your technology adoption. What are you anticipating in 2023?
And I think some of these numbers are going to have Danny pretty happy here. Danny, so look at this, our audience is with it. They are on it. This is not an issue. I guess they're concerned about, they're just full speed ahead. Does this surprise you, or is this an encouraging? What do you think?
DANNY SEIGLE: This is very encouraging, and what I expected. The industry, as they face more and more challenges, they have the need for more and more solutions to adopt technology to solve those. And so I think those two go hand-in-hand. And also, over the last several years, there's been a huge marketplace of partners entering the space to fill more and more of those needs. So people are focusing on building custom solutions for the construction industry.
At our user conference last month, I saw our 3,000-plus customers that joined us in New Orleans running around the expo hall floor and meeting all the various vendors that were on the expo hall. And they were very, very curious to learn how they can solve various pain points in their operations. And technology adoption is an always iterative and improving process. You can't just do everything all at once. So it's a tidal wave that will continue on into 2023 and beyond.
JOAN WOODWARD: That's really encouraging. That's terrific. OK. So again, audience members, if you have a question for any of our panelists, just throw it in the Q&A, and we're going to get to them shortly. So Lisa, I want to ask you first about-- you work every single day with our agent and broker partners out there. And what are they worried about? What are they optimistic about going into 2023? Because there's been such disruption for all of us, obviously, in the last couple of years. But what's on our broker and agent minds these days?
LISA MORGAN: For agents and brokers, I spent a lot of time certainly working with them. In terms of construction, in particular, a lot of the same themes that I've already talked about, a lot of optimism around just kind of the flood of dollars that the federal government will be pumping into this industry. And for their customers, all sorts of optimism about what they see as in terms of potential for continued very healthy backlogs going forward. Certainly, their ability to continue to consult them in the technology space.
So we've talked about that a lot over the course of the last half hour, is a lot of the challenges that they have now, just in terms of the ability to absorb everything that's out there that is geared towards this construction segment, having resources dedicated to this work, not only in terms of their ability to sift through the proliferation of software vendors and platforms out there, but also how to advise their customers in terms of how to use them, how to adopt them. And then certainly, how to leverage the data that comes out of them and, ultimately, build action plans that reflect certainly a lot of the insights that they get from the technology. So that is probably the newest in terms of the agents and brokers that I talk to in terms of what they're focused on and, certainly, what headlines they have as they move into the upcoming year.
JOAN WOODWARD: OK, thanks. I'm going to get to Chase and Danny here. In your opening presentation, you really talked a lot about technology and innovation. I want to dig into that right now. So some practical questions for our audience. First, can you talk about tech adoption? Are there technologies that are kind of low-hanging fruit, if you will, easier to implement? What's the bar generally for getting up and running with these kind of new technologies that are kind of coming on the market all the time?
CHASE LEIST: Danny, I'll grab that. I'll say that we have a really thoughtful approach to the technology that we partner with. And we’re probably-- we take a long time to really evaluate the solutions that we do implement at the job site, and we kind of do them in pilot programs to make sure that they are going to meet the needs that we're looking for. If you have a full understanding of what your risks are and what solution you're trying to achieve, or what problems you're trying to solve, you understand whether a solution is going to help you get there, or whether there are still some gaps that need to be addressed within that technology solution.
And so we try to do a pilot program to say, let's deploy this in one region, or one business unit first, try to work out the kinks, and then make a decision about do we want to deploy this across the entire enterprise? Impacting 2,500 jobs a year, we have so many different touchpoints that we can't just put a new solution out there without really giving it a thorough review. And so that does elongate the process by which we spend bringing technology to the operations teams.
But when we do, as I described with our relationship with Procore, it's a long-term relationship. So once we decide that the solution is right for us, we go fully in on that. Now, that said, that doesn't mean that every solution is going to meet all of our needs. And so there's a lot that we vet throughout the course of a year that we say, you know what, now's not the right time for that, but let's continue to think about that or see how that product or that solution evolves over the coming years, because the evolution of these products is very rapid. Eighteen months from now, you're going to see an entirely different landscape of options available to you.
JOAN WOODWARD: OK, then secondly, in your experience, has tech generally been a welcome addition, or are there common kind of reservations among our construction customers for these new innovations? What's the reservations around it maybe, Danny?
DANNY SEIGLE: This is definitely one that's changed over the years. I always like to share a story that I was visiting a construction site in Austin, Texas, and there was a gentleman. I think he was in his upper 60s, superintendent, and he had his iPad there being so excited to show us how he was using Procore every day on that construction site, and that it was kind of a completely different world for him from the way he grew up doing construction site his whole life, and what the real influence was in terms of how they're able to better track what was happening on site, take control of the operations. And so I always like to use that story as like a real example of where the industry came from and then where it is today.
And I think that momentum is only continuing to build, because there's just so much need for better tracking and performance, better collaboration across all the various people that come on a construction site, and there's a lot of resources now to help contractors better understand what solutions are out there, a lot of reference customers, obviously. And then things like the Procore app marketplace, because a new need that contractors are having now that there's so much different technologies, they need it all integrated together. And so making sure there's the open APIs integrated with whatever solution they're using, whether it's Procore or other solutions, and then seeing that other customers are becoming successful on those solutions. And it's everything from certificate of insurance tracking, scheduling, productivity, labor. It goes on and on and on. There's so many topics in the construction marketplace today.
JOAN WOODWARD: Yeah, good, good. I want to get into risk control, because we have so many risk control professionals at Travelers working every day to prevent accidents and workplace issues from occurring in the first place. So maybe to Lisa on this one. How is the traditional risk control work changed in the context of this emerging technology that's coming into play in the construction industry?
LISA MORGAN: Joan, thanks for the question. Always happy to highlight our risk control partners. I've mentioned them a couple of times over the course of the hour, and certainly, this gives me a bit of a different platform to talk about the work that they're doing to certainly support the business, but also the agents, brokers and customers that we work with. This team is really leading our efforts around the exploration and testing of the technologies that I talked about earlier. They're engaging with our customers really in terms of learning about tech solutions and helping them work through all sorts of challenges that they're having, whether it's with the technology or with mining data, and really trying to drive solutions so that they can make those technologies that they invest in as productive as possible and addressing the issues that they've identified.
Construction Risk Control at Travelers really is leading a lot of the test and learns that I mentioned earlier as a critical step in the innovation process. These pilots have included everything from wearable devices to some water sensor technology. Chase mentioned one particular vendor earlier today. And they're just giving us incredible insights that we're not only leveraging in terms of our underwriting process, but also passing on to our agents and brokers and customers back towards them trying to sift through everything that's out there. And so Risk Control is at the center of a lot of this work.
They also work with our customers to use job site observations and loss analysis to identify activities, or tasks, repeated tasks, that could then cause losses. They've leveraged all sorts of technology to do ergonomic video assessments to identify all sorts of solutions to try to gear towards risk prevention. And then finally, you know, especially in light of the pandemic, but they were well ahead of this pre-COVID, they've really adopted an online platform to meet customers where they are in terms of all sorts of risk control needs, from certainly, onboarding advice, to training.
Their motto is "On-site, online, and on demand." So all sorts of different ways to access them in terms of the experience and the insights that they bring to this industry. So punchline here, they are an invaluable resource to us and certainly to the customers that we work with day in and day out. And they are literally leading the charge that we have in terms of being an innovator in this space, an industry thought leader.
JOAN WOODWARD: Thanks. And Chase, I want you to jump in here, because are there advancements you've implemented that would significantly improve the safety outlook? I mean, tell us about what you're seeing and innovation-wise in risk control.
CHASE LEIST: So I'll echo what Lisa said about using the technology to the ergonomics, the repetitive tasks, those kinds of things. I briefly mentioned about our use of robotics to work in confined spaces, and to take on the work that needs to take place, but is generally very repetitive, and can result in issues that could lead to workers comp claims, so those types of activities. So we've leaned into some of those technologies. We've also leaned into technologies such as OpenSpace, which is a way to get eyes on a large project from a remote location, which is something that we do for projects that we have in remote areas.
And that has helped us to really understand the process of the project from a remote location, and then also document that project. That helps us defend matters when they come to pass if it were to be a claim situation. So some of these technologies help improve our risk management overall through leaning into these and giving the tools to the people at the job site to deploy them and use them effectively.
And water damage sensors, those are sort of table stakes to be honest. That's what we do now as a par for the course for water damage prevention technology. And we'll continue to do that as those products continue to evolve to make sure that we're still using the best in class.
JOAN WOODWARD: So, Danny, I want to pull you in, because you just talked about your 3,000 person, 3,000 contractors convening to learn more about best practices. But when you think about the vast amount of tech that has really come about in the last couple of years, where do you think we're saturated? And then where do you think there might be some opportunities?
DANNY SEIGLE: I think there's a lot of opportunity across a lot of various topics. So labor, we've recently launched a new workforce management solution, really making sure I think the first step in the labor problem is the labor you do have today, making sure they are as productive as possible, that they're getting assigned to the right sites at the right times with the right materials on site, because you have to be really, really productive when you're short on labor. So workforce management being a really key one, because when I talk to contractors, I'd say that often comes up. Skilled labor is the No. 1 issue they're having.
I think there's a real huge opportunity in terms of now that the construction industry has digitized a lot, and there's all this data and understanding of what's happening on a construction site, unlocking the value of that data to better enhance underwriting and other financial services to better differentiate and price risk, I think you'll see a lot of that happening over the coming years. And it's a lot of stuff we're working on with various partners. And I think that will be a big part of the next decade of unlocking the power of that data.
And then just more IoT sensors on-site, and better understanding where the tracking of the progress, just more and more connectivity on the job site, and more and more data being gathered to take control of the operations. And so another product that I get really excited about is Procore Analytics. I like to think of it as a kind of mission control of being able to see everything at once on your project. And I saw there were some questions about data security and access. And I think that's one that we've taken very, very seriously.
And the way we answer that one is being very, very granular with data control, and putting the customers in control of their data. It is their data. They own it. And then they can then be very careful with how they're going to access user provisions for who needs to access which tools at what time, read only, write only, things like that. And so you'll be able to have a lot more power of your data to unlock both analytics, AI, ML, and other models in the future.
JOAN WOODWARD: OK. Thank you for that. I'm going to pivot a little bit. We want to talk about insurance solutions. And I know, Danny, you mentioned that obviously, insurance is one of those high-cost items in the budget. Lisa, let's talk about that, how the insurance solutions premiums have evolved, and whether or not these adoption of new technologies and innovative technologies, do they really impact insurance premiums in a meaningful way? And you're saying, is this evolving? What are you saying?
LISA MORGAN: OK. So hopefully, we've established today that the construction business carries a lot of risk, and that risk varies by type of contractor, type of work, where that work is performed, many other factors. We've also discussed how escalating costs are certainly permeating every sector in the economy, and that includes insurance. Economic inflation is one thing that we talk about and think about a lot certainly, in this space. So think about things costing more to replace, whether that's cars, or property damage, wage inflation, certainly, we've talked about a lot. But that certainly factors into how we think about pricing our risks, and certainly, the price that we pass that we take into account when we think about, ultimately, the price decisions that we make day in and day out.
Social inflation is another thing that we've talked a lot about in terms of just what's happening on the court side in terms of claims that ultimately end up litigated. Propensity of jurors to award what we call nuclear verdicts, the multimillion-dollar verdicts, has certainly driven up cost. And then you highlighted whether early on, but certainly an ongoing dialogue in terms of claim trends that we analyze. So certainly, these are all trends that we think about as we think about how to price a risk. And I think it's really important to understand and underscore that at Travelers, the cost of insurance is always an individual risk decision.
Final point that I want to bring up before I get to the impact of innovation on pricing, is the value again, of our risk control, and our claim partners, and our value proposition there. From programs like Travelers Workforce Advantage, which is a program of resources designed to reinforce the importance of safety, health and wellness throughout all stages of the employment cycle, to our Travelers Comp Model, which is designed to get employees back to work as soon as medically appropriate, both of these teams bring vast expertise and experience that ultimately help drive down cost of insurance over time. When it comes to, ultimately, the impact of technology and innovation in terms of how we think about pricing risk, we understand, first and foremost, that purchasing, subscribing, deploying new tools for our customers adds cost and resource time to analyze and test.
We also understand that the impact of loss prevention can take years to realize. But we absolutely do consider a customer's use of these types of tools and platforms as we think about the strength and health of their safety culture and, certainly, their dedication to risk prevention. So I'll say that there's not a one-to-one relationship in terms of you use this tool and, ultimately, this is how it reflects on your pricing, but is most definitely on the minds and, certainly, in the thought process of our underwriters as we ultimately make pricing decisions.
CHASE LEIST: If I could continue on that from the insurance lens, I would say that continuing that you mentioned an ongoing conversation, Lisa, I would say having that ongoing conversation with your insurance provider, your broker, your agent, your insurance company, and keeping that line of communication open throughout the year, not just in the 90 days prior to renewal and then see you in 12 months, having that ongoing relationship, encouraging the risk control visits, encouraging the feedback, wanting to hear that clear pathway, or that clear best practices that we could be implementing that we just didn't know about, but that our insurance company could advise based on their breadth of knowledge, those types of efforts can overall impact the purchasing power of an individual corporation for the purpose of buying insurance. Because that demonstrates that relationship, that commitment throughout the 12 months of the relationship in the policy year, not just at renewal time. So keeping that line of communication open is paramount.
JOAN WOODWARD: Great. I'm going to jump in and take a few audience questions now. So this one's coming to us from Ron Thompson in Texas. He says, “Another challenge is the spiraling cost of litigation for construction companies. Plaintiff representation is at an all-time high here in Texas for over the road and job site claims, causing insurance premiums to skyrocket.” So we've seen this all over the country, not just in Texas. But Lisa, do you want to speak to this in terms of litigation risk? And really, the lawsuit abuse pushing prices for all of us higher? Society, of course, bears the burden of this for everyone, not just those who have to pay the claim.
LISA MORGAN: Certainly, a theme that permeates certainly how we think about construction, but also Travelers across many of our commercial customers just in terms of that dynamic. We spend a lot of time with our claim partners really understanding what is happening in terms of jury verdicts, and ultimately, plaintiff behaviors. They have incredible data and insights in addition to the claims that we litigate day in and day out that we work through with them real-time to really understand what is happening.
Certainly, with courts reopening, and courts working through the backlogs that piled up during the pandemic, more of an issue than it ever has been. The tort system is certainly becoming more active, and the success of the plaintiff's bar is usually dictated by some of these larger verdicts that I've been talking about that seem to have been a theme over the last several years with no stop really, in the foreseeable future. Ultimately, when we think about how we work through those dynamics, our claim partners are invaluable in terms of insights from the plaintiff's bar, defense bar, they do a lot of mock juries to really understand what the value of an ultimate claim can be when it gets in front of a jury. But an ongoing issue that really doesn't seem to be ending any time soon in terms of how we think about, ultimately, claim values and cost over time.
JOAN WOODWARD: OK, thank you. Another question coming in. This is probably for Danny here. Danny, is there an opportunity for Procore to weave their current software into job site risk management, such as security cameras, fire and water alarms. Or is that going to be a headache for Chase then?
DANNY SEIGLE: That's a great question. So already today in our Procore app marketplace, we have a lot of integration partners on those topics, rather sensors, to automatically push data into Procore in the daily log to make sure what happened on that site, or what those sensors are reading or is easy to report on and available to everyone. We also-- one way I like to think about it is, Procore is actually risk management software. We market it as construction management software.
But all the workflows you're tracking in Procore are making sure your RFI logs are getting closed out properly, your submittals are done on time, that your digital blueprints are submitted to all project participants, you do all of those and take control of all of those workflows, because if you don't do that properly, those are risks on the construction site. And one of the early enterprise customers we had when they first adopted Procore and told us how it went, that was the kind of quote he came back with us was, I actually bought risk management software. You guys told me it was construction management. So that was really eye opening to us in kind of our journey of what we were really doing for the industry over time. And so I think the culmination of our partnership with Travelers and other things in the insurance space over the coming years will really help merging those two worlds together of technology and risk management.
JOAN WOODWARD: OK. So let's pivot a little bit. We have a couple of questions coming in about people seem to be pessimistic that we might hit a recession next year. And so, Chase, I'm going to ask you this, how is your company preparing for times when business cycles may be changing? So we might not have that soft landing. Let's go to the worst-case scenario of a real recession hitting us, and how does your company prepare for that, prepare their clients?
CHASE LEIST: Yeah, well, we us internally, I'll speak from our lens first, is that we want to make sure we're diversified; that we don't have any one particular segment of the industry that is our full scope of our revenue base. And so we make sure that we have areas that prop up in certain times of downturn in areas that are quieter and vice versa. I'll just speak candidly, from during COVID, the health care vertical was quite quiet. They were redeployed to other purposes, but other areas of our business in data centers were very busy. So it was having that diversification in our portfolio of customers helps us manage some of these ebbs and flows.
As was described earlier, the construction industry does lag the overall economy because of our existing backlog. And so we tend to get a little bit of a preview of what is to come, because we start to hear discussions of downturns, and layoffs, and those sorts of things earlier than it materializes in our business. So we're able to get ahead of some of those discussions. I think it's also very important that we select our clients, and our customers, and our project types very thoughtfully, and that we don't-- there's a tendency in the construction industry to just put backlog on the books whether it's a good opportunity or a appropriate project type for the company, just to get that backlog there, which could end up resulting in bigger risks down the road that had you known would have come to pass, you probably wouldn't have taken on that project that you weren't really well suited for. So being really thoughtful about not just propping up the backlog by taking on work that really isn't our wheelhouse is another way that we're preparing to avoid future risks related to the potential downturn.
JOAN WOODWARD: OK. Lisa, this question's coming in probably for you, I would say. Stephen Garrett in Boston asked, “What are some of the top claim issues, claims you're seeing in the construction industry today? And has that changed since the pandemic hit?” And maybe this is a good time to talk about Claim University at Travelers, which is something we're very proud of.
LISA MORGAN: Most definitely. So, certainly, as I mentioned earlier, our claim partners, incredibly important part of the team, shaping not only how we think about the business, but also the advice that we provide to our agents, brokers and our customers. We're seeing a continued increase in claim activity across auto, general liability and umbrella. Tenure and skilled labor as I mentioned earlier, certainly plays a part in it, as we're seeing the industry get very creative about how they supply labor towards some of the projects that they work through day in and day out. Certainly, this impacts general liability and workers comp claims.
We do a study here at Travelers. So we have a vast amount of data in terms of claim activity. And we recently did a study looking at the last five years of workers comp claim activity. And we learned through that data analysis that over half of work comp claim activity takes place with workers who have been with a particular company for less than a year. So certainly, labor and tenure of labor plays into the claim activity spikes that I saw.
Certainly, with larger states that have robust and active economies, like California, Florida, Georgia, Texas, certainly seeing some spikes there. And then as I mentioned earlier with the concept of social inflation, a very active plaintiff's bar, no shortage of issues that our claim partners are certainly working through day in and day out and advising us on. We have incredible experts here. You mentioned Claim University, but all sorts of tools that these teams are working and evolving to address these trends, and provide us with real-time insights that ultimately we can think about in terms of how we manage the business and, certainly, how we work through the partners that we work through externally in terms of our agents and our customers.
JOAN WOODWARD: OK. Question here now for Chase. How are you, or are you, auditing cybersecurity controls for your tech vendors? Are you auditing those or not? How are you thinking about it?
CHASE LEIST: I will say that that's a growth opportunity for us. We are-- there's a variety of touch points on this topic. One is that our clients and our customers are insisting that we are auditing our tech vendors and providers, and what have you, and providing levels of scrutiny around the products that we're choosing. And so we are directed by our customers to do so. And so we've taken those directives to heart, and vamped up a lot of what we do there, and brought on security experts and those sorts of things to make sure.
But that's a paramount discussion, because even though there's been some sort of, I would say, historical thoughts of construction being a fairly cyber insulated-type industry, where you can still swing a hammer even if your systems go down, you can still do the work at the job site, it does not mean that we're insulated from those risks. We are absolutely at risk of a lot of different defaults and all types of things if we can't move money or move project documentation around.
So those areas are something that we are constantly looking at, working with third-party consultants, working with our cyber insurance companies, and our cyber brokers to make sure that we've got the right information and best practices, because, like any other technology, those are moving and evolving even faster than other types of technologies. So trying to keep our finger on the pulse of those risks can be very difficult, but we've deployed a full team to manage those and using those. That's part of our due diligence process when bringing on a new technology system.
JOAN WOODWARD: OK. Last question, anyone can jump in here. Alex Zank asks, “What cyber-risks are introduced with the adaptation of new technologies and construction? Likewise, how concerned are the insurance and construction companies with rising focus on business interruption coverage by ransomware attackers?” So people are very worried about cyber. There's lots of questions from our audience on cyber. Who wants to grab that question?
CHASE LEIST: I'll start it off, because I can speak a little bit from personal experience. There is a combination of looking for low-friction technology to support the operations. And I talked about that in my earlier slides about how we're always looking for ways to make things easier and less complicated for the project management and the people who are at the job site doing the work, putting the work in place.
However, low friction also becomes, unfortunately, very slippery when it comes to cyber-risks. And so I'm always having that discussion with various constituents around the company about how can they keep it low friction but have just the right amount of friction such that it doesn't allow for too much data to go into the wrong hands? And so this is something that we're always looking at.
And there have been times when I have-- we've pushed for low friction, and then I've said, no, that's really not right for the organization. We really need to make sure we have a little more checks and balances here from the flow of data. And we've made changes to improve that. And that's something that is always going to be a discussion, because if you look at the legacy industry experts, and how things were 20 years ago, it wasn't a concern. It was just that was what it was. But now, that's the reality we're facing. And so trying to balance that operational efficiency with flow of data being controlled in the appropriate levels is a constant effort.
JOAN WOODWARD: Great. Well listen, I have to end this here. The hour has flown by, my friends. And I, just a huge thanks to Lisa Morgan and their team for your leadership in this industry. You are a leader in this industry, the construction world. And Procore and HITT Contracting, of course, for your partnership with us and participation. So again, Lisa, Danny and Chase, thank you so much. We'll have you back on next year, because this interest level is just through the roof just based on almost 4,000 people signing up for our program today. So thank you again. We really appreciate your time today.
The three speakers wave goodbye and leave the video call.
LISA MORGAN: Thank you.
JOAN WOODWARD: And, my friends, that's a wrap. This officially marks the end of our 2022 programming. We'll be back on January the 11th.
Slide, Wednesdays with Woodward (registered trademark) Webinar Series. Upcoming Webinars: January 11 - Smart Brevity (registered trademark): Power Up Productivity with Clearer Workplace Communications Featuring Axios and Politico Co-Founder Mike Allen. January 18 - Making Sense of the Headlines: Insurance Market Insights for 2023 Featuring Industry Veteran Dr. Robert Hartwig. January 25 - Health New Year: Nourishing Food Habits for 2023 Featuring Matthew Rees, founder FoodandHealthFacts.com, and Kristen Coffield, founder of The Culinary Cure. Register: travelersinstitute.org.
So watch your inbox this afternoon for an invite. We're going to have on January 11th the mastermind behind Politico and Axios, the founder, the one and only Mike Allen will join us about Smart Brevity, which is the new book he has just published, and we're offering that complimentary to our friends. So it's all about business communication and really capturing people's attention, which we all have to do in this busy world.
Then on January 18, we're going to thrilled to welcome back fan favorite Dr. Rob Hartwig for his outlook on the P&C industry in 2023. And then we all know we make these New Year's resolutions to lose weight, and get healthy, and give up junk food, and the like. So we're going to talk about nutrition on January 25. We have two food experts to try to get us healthier for the new year. So please join us then.
And listen, we're really grateful to all of our listeners and our audience members for joining us on these Wednesdays.
Slide, Wednesdays with Woodward (registered trademark) Webinar Series. Watch Replays: travelersinstitute.org. Connect: LinkedIn, Joan Kois Woodward. Take Our Survey: Link in Chat. #WednesdayswithWoodward.
I hope you have a wonderful holiday season with your family and friends and get time to relax and enjoy life a bit. And we will see you in January. So thank you again for your continued support of the Travelers Institute and our Wednesday sessions. Take care, my friends. We'll see you in the new year.
Text, Travelers Institute (registered trademark). Travelers. travelersinstitute.org.
Join Our Email List
Get on the list to receive program invitations, replays and more.SIGN UP NOW