Finding the Link Between Construction Risk Control and Claims

According to a study by the Center for Construction Research and Training, construction workers who work at least 45 years on the job have a 75 percent likelihood of experiencing a disabling injury, and their chances of dying on the job are 1 in 200. Construction industry employees of varying experience levels are vulnerable to injuries. For this reason, risk control professionals must be vigilant when controlling exposures and residual risk that could lead to financial and human costs.

Risk control has the opportunity to extract the same data from information systems that claims departments use and collaborate with claims professionals to help develop action plans that mitigate and control risks. Because both disciplines share the goal of reducing risk and controlling loss at phases of development, frequent communication between risk control and claims is important to address residual risk faster and, subsequently, decrease injuries on the jobsite.

Effective communication between risk control and claims can occur only if both sides are prompted intuitively or by formal process to communicate when claims above certain thresholds are reported. Faster communication between claims and risk control reduces the lag time in risk control’s response to residual risk. Claims administrators and risk control professionals within the construction industry often operate in silos and don’t communicate regularly. Consistent, intuitive communication occurs only when leadership establishes a culture of openness within the organization and with risk services providers. This type of culture allows risk control and claims professionals to communicate directly, while keeping other stakeholders informed.

A formal open communication process consists of risk control and claims having access to the same data from a risk management information system (RMIS) or loss analytics. Risk control could set the thresholds for key risk indicators and actual loss data to prompt leaders to address the risk associated with any notification. Within an expedient timeline, risk control could then gain additional clarity, insight and advice from claims professionals regarding issues surrounding certain claims. An example would be risk control collaborating with their insured client on corrective action after a major incident and subsequent loss. This corrective action would have implications for the immediate construction project and future projects. Insight and advice based on knowledge of a claim can also benefit the outcome of claims, especially if risk control identifies profound opportunities for subrogation. The optimal benefits of risk control intervention are more likely to be realized if risk control can be nimble in their response to identified risks.

Top operations leaders must emphasize early reporting of incidents and claims. The lag time in reporting soft tissue injury claims in the construction industry, for example, can be a major factor in the loss experience of a given company. However, early intervention of soft tissue injury claims is more likely to result in the best outcomes for the claimant’s indemnification and his or her employer. Risk control can assist by addressing ergonomic risk factors and work practices at jobsites that can ultimately lead to soft tissue injury claims. Addressing risk factors and work practices helps bring injured workers back to productive work as soon as possible. This can be a reality because the injured worker would return to a jobsite that has reduced risks and safer work practices, instead of going back to the same, unmodified job where they were originally injured. The operations leaders are responsible for determining the level of intervention needed based on investigation of each incident, injury and claim. In order for a construction employer to gain optimal benefits from early reporting of soft tissue injuries, there cannot be any actual or perceived negative consequences for early reporting of risky incidents and subsequent injuries.

A quality claims intake process ultimately determines if risk control professionals will be able make use of quality loss data and analyze trends in the loss information. Loss information is used by risk control professionals to direct and collaborate with insured clients to address loss trends and identify sources of loss. If the loss data is vague or not categorized properly, risk control professionals have to spend valuable time gaining clarity on the residual risks that lead to losses. In some cases, inaccurate data coupled with biased opinions can lead to misguided risk control efforts and misuse of resources. If vague data points appear in groups of loss data, this could indicate the need to educate clients on incident investigation or redefine and rescale the claims intake process.

Access to quality claims data can also help sustain the emergence of integrated project delivery (IPD) for design-build constructors. IPD is a project delivery method distinguished by a contractual agreement between the owner, design professional and builder, through which risk and reward are shared and stakeholder success is dependent on project success. One of the goals of IPD is to meet the financial objectives of the owners, architects and builders of construction projects. The bidding process can be more accurate by planning for contingencies related to a history of the cost of certain claims. Risk control and the safety manager’s knowledge of past claims will help them plan the use of certain equipment, training and practices to prevent accidents and injuries. Prevention of claims, combined with the financially planned methods to achieve prevention, reduces the likelihood of project cost overruns. When owners, design professionals and builders are more risk-aware and insightful about their claims history, the IPD objective of risk/reward sharing versus risk shifting between parties is more primed to be agreeable and successful. Ideally, in the context of IPD, risk sharing would include open collaboration between each party’s risk control and claims professionals.

The more contractors know about their past risks, the more this knowledge can be used to predict and prescribe treatments for future anticipated risks.