Construction & Workers’ Insurance: a triple threat scenario (lose-lose-lose)

May 12, 2020

We’ve become quite enamored with exoskeletons

… if we’re being honest, ever since we saw Ripley dance toe-to-toe with Aliens on the silver screen …. “get away from her you b%$^… ”

& the multi-parameter value add such devices could proffer the construction industry.

A distant second, or third-order benefit could be a play to compliment new underwriting insurance structures & safety risk management applications to be birthed in the current construction-tech renaissance.

This got us thinking about the insurance industry & its dance partner, construction… What’s the tempo?… discordant partnership? … two left feet?

Let’s take a look …

Globally, 1,000 fatalities are recorded every day from occupational accidents, and that’s without counting occupational disorders. In both Europe and the US, ⅕ of these work-related fatalities are happening on construction sites.

In 2018US construction sites accounted for 1,008 work-related fatalities. Moreover, according to OSHA, 10% of construction workers in the US received a work-related injury in 2019 and the Bureau of Labour Statistics reported that there are roughly 150,000 construction site accident injuries each year.

Every US worker is covered by Workers’ Compensation insurance, whereby medical expenses and time-loss wages are covered in the case of work-related injuries.

Given how each company/project is unique, one would think insurers write policies dynamically, and help institute a holistic safety & risk management platform.

The truth is, insurance companies lack the data to do so. The pricing set by insurance companies for Workers’ Comp is based on an “industry-wide” classification rate, and does not take into account the risk profiles of individual construction sites.

As a result of this “one size fits all” underwriting process, the following pain points occur:

  • Low monetary incentive to increase safety — undue/unfair burden on companies that operate a safe workplace environment
  • Expensive insurance — premiums paid by construction employers is 3x higher than national average
  • High claims costs for insurers — high injury rates means high losses for insurers. 15% of losses incurred by insurers from Workers’ Comp claims in the US are spent on workers injured on construction sites

The status quo is broken.

Insurance firms lack the data and domain expertise to accurately assess risk, dynamically. In other words, construction and insurance are playing a game of telephone: speaking to one another albeit from great distances.

Data is a much needed antidote. And given the recent construction-tech renaissance, data is not an issue it once was.

“Peek not through a keyhole, lest ye be vexed”

-Stephen King

From AI to onsite cameras and sensors, millions of venture capital dollars have flowed into sophisticated tech companies able to both capture and process quality data from construction sites, real-time. Yet, this treasure trove of information is mainly being used to allay immediate business-related pain-points.

This is a stride forward as it builds a foundation of ground-truth enabling multiple stakeholders access to a shared set of facts. It’s our opinion: If there is no transparency, there’s zero accountability and if there is no ground truth we are in essence writing bad checks from our collective memory bank. Ergo: Memory is fallible (and limited) at the end of the day.

As referenced, there are new innovative solutions providing real-time visibility and transparency, tracking jobsite health to minimize schedule surprises and a select few providing immediate value during COVID-19 crisis tracking (labor) density & prolonged proximity. As an example: IndusAI, a Foundamental portfolio company, proffers such a look through a keyhole to make data-driven decisions with actionable insights whilstdecreasing time on claim disputes — providing end-users H&R Block-like “Peace of Mind” level of service— and subcontractor coordination.

This is our onramp to a high-speed highway for tiered services and solutions, leaving the old dirt road, connecting to the digital era. Similar to Google becoming the gateway to the internet because they answered your first question

…this is our onramp, turn right.

So far in the construction-tech space, companies have become increasingly successful in leveraging data for many services/solutions such as project management, internal collaboration and incident reporting to reduce rework whilst harvesting productivity/efficiency gains. At Foundamental, we’re searching for firms who are going through an evolutionary growth spurt — introducing new models into the ecosystem — by leveraging captured data in an entirely new way.

As previously established, and in our opinion, the solution rests with (actionable) data in the hands of those wielding domain expertise. Rather than looking at reinsurers who may expand their offerings into the construction industry, we believe innovation will spark & be orchestrated from the other side of the aisle: construction-tech firms evolving, building a ground-up solution to the insurance ecosystem. As such, we are inordinately interested in firms who can vertically integrate risk from the front line — literally from the gals/guys with the tools onsite all the way to the insurance industry. This takes domain expertise.

Similar to the waltz, someone must take lead; It is our belief that construction will take the lead given the highly specialized nature of the industry.

We have the What, the Why. We need the How.

More specifically: how can we solve the multi-pronged pain-points illustrated above?

The US market is full of companies that monitor and improve safety performance of construction sites: we believe these platforms will inevitably invite collaboration with the Insurance Industry. This provides reinsurers greater access to the specialized high hazard segment of the workers’ compensation segment.

Much like insurance, some safety monitoring companies are analyzing their data to capture the risk profile of various construction sites, on a real time basis, thus providing an entirely different yet compatible format to the insurance industry.

Hence, risk assessment on the basis of real-time field data is the key via which construction-tech companies can penetrate the insurance market.

Construction safety & risk management platforms can maximize the value of its risk assessment by playing an active role in the underwriting and pricing of insurance policies such as Workers’ Comp.

With risk analysis of live, individual projects, construction-tech startups with underwriting authority would have the ability to apply both tailored pricing and dynamic pricing to different construction companies, which isn’t possible for traditional insurers. In this way, the premiums faced by construction companies will be more in-line with their risk profile, not only passively monitoring & improving safety performance but directly contributing to their premium. As such, these new startups can renew the Workers’ Comp policies for “low-risk” construction companies at a discount rate, and keep the premiums high for high-risk companies.

In answer to the multi-pronged problem:

  • Pricing: abolish uniform pricing
  • Compliance: higher safety yields lower insurance premiums → incentivised to drive safety measures, increase worker safety
  • Profit: Insurers have the ability to arbitrage the market, making more profit

One way construction-tech startups can acquire underwriting authority is by becoming a MGU (Managing General Underwriter) i.e. a specialized insurance broker with key functions such as pricing, binding coverage and settling claims, sitting at the intersection of carriers and clients.

MGUs have been successful (in other industries) when markets signal a need for more specialized products, as their underwriting discretion allows for more product customization than traditional brokers. At Foundamental, we believe the construction industry is in need of a tech-enabled MGU business model as conventional safety & risk management platforms are saplings in infertile soil.

Safety & risk management platforms who can navigate to a tech-enabled MGU structure (with aim to pivot to a full-stack carrier) is an elegant (and defensible) evolutionary path to providing greater value to both construction & insurance industries alike.

We remain bullish on the blueprint design in its ability to alleviate festering pain-points that have yoked the construction & insurance industry. If you are a Founder building such a firm, Foundamental would be grateful to hear your story!

Big thanks to the Foundamental Insights team for uncovering unique nuggets of information for this article.


  • Occupational Safety and Health Administration
  • Bureau of Labour Statistics
  • Eurostat
  • Insureon