Construction Insurance Industry Statistics 2024: Market Growth, Costs, and Challenges
Barry Elad
Updated · Nov 22, 2024
Imagine a bustling construction site: machines whirr, workers bustle, and buildings rise from blueprints to reality. Behind this structured chaos lies a complex safety net woven by the construction insurance industry. From protecting workers to securing assets, construction insurance is a cornerstone of the industry, helping businesses navigate risks associated with accidents, delays, and property damages. In 2024, with new market shifts, technologies, and rising risks, construction insurance is more critical than ever. This article provides a comprehensive view of the evolving landscape, key milestones, challenges, and emerging construction insurance trends to help you confidently navigate the industry.
Editor’s Choice: Key Milestones in Construction Insurance
- The global construction insurance market is projected to reach $17.4 billion by 2024, showing an annual growth rate of 6.5%.
- In 2023, 54% of US construction companies reported expanding their insurance coverage to address growing risks, including natural disasters and cyber threats.
- Cyber insurance in the construction sector saw a 22% rise last year as companies adapted to protect against ransomware and other digital threats.
- Worker injury claims in construction dropped by 5.2% in 2023, partly due to enhanced safety measures and advanced monitoring technologies.
- The top five US insurance companies in construction held a combined market share of 42.7% in 2023, illustrating concentrated competition in the industry.
- Builder’s risk insurance premiums rose by 15% in 2023, mainly driven by material cost inflation and the frequency of natural disasters.
- In a notable shift, 33% of construction firms are now exploring integrated digital insurance solutions that simplify claims processing and offer real-time risk assessments.
Market Size and Growth Trends
- North America dominates the construction insurance market, accounting for over 37% of global revenues in 2023. Forecasts indicate this will rise to 39% by 2025.
- The Asia-Pacific region is experiencing the fastest growth, with an annual increase of 8.1% driven by large infrastructure projects in China and India.
- Property and casualty (P&C) insurance forms the largest segment, making up nearly 50% of the global construction insurance market.
- The small to medium-sized construction firms in the US alone account for 45% of insurance claims in the sector, largely due to limited resources for risk management.
- Environmental liability insurance is growing in demand, projected to increase by 12.5% over the next three years as sustainability and environmental concerns rise.
- In the European market, premium costs surged by 7% in 2023 amid rising operational risks, including material shortages and extended project timelines.
- Construction defects insurance saw a significant jump, with claims rising by 11% in 2023, driven by complex, multi-use developments that often result in litigation over structural issues.
Significant Challenges Facing the Construction Insurance Marketplace
- The frequency of natural disasters has led to higher claims, causing insurance premiums to rise by 13% on average for property and casualty coverages.
- The cost of litigation related to construction projects increased by 9% last year, making liability coverage essential yet more expensive for companies.
- Cyber threats are on the rise, with construction firms experiencing 14% more data breaches in 2023 than the previous year, intensifying the need for cyber insurance.
- Worker shortages have driven up labor costs, impacting overall insurance expenses due to a higher risk of injuries and claims for inexperienced workers.
- With the complexity of modern buildings—smart technology, automation, and sustainable materials—the risk of claims related to construction defects has increased by 10%.
- Compliance with new regulatory requirements in sustainable construction has added 5-7% to insurance costs as companies adapt to green building standards.
- The supply chain crisis in construction continues to influence project delays, leading to an 8% rise in builder risk claims over the past year.
Property and Builder’s Risk Insurance
- Builder’s risk insurance now covers 85% of construction projects in the US, a 7% increase from last year, as more projects opt for comprehensive coverage.
- Premiums for builder’s risk policies surged by 10% in 2023, reflecting the increased cost of materials and frequency of severe weather events.
- Theft and vandalism claims in builder’s risk insurance rose by 12% last year, a trend linked to the shortage of materials and equipment on job sites.
- Modular construction projects have boosted demand for builder’s risk insurance, with 65% of modular projects now requiring specialized coverage.
- Natural disasters such as hurricanes and wildfires have led to a 14% increase in builder’s risk claims, pushing insurers to revise their risk assessment models.
- Insurance deductibles for high-value construction projects have increased by 5-8% as insurers aim to mitigate high claim frequencies and values.
- Green building projects account for 20% of builders’ risk policies in the US, as developers increasingly prioritize sustainable and eco-friendly practices.
| Metric | Value |
| Builder’s Risk Coverage in Projects (US) | 85% |
| Premium Surge for Builder’s Risk | 10% |
| Theft & Vandalism Claims Increase | 12% |
| Modular Projects with Builder’s Risk | 65% |
| Natural Disasters Impact on Builder’s Risk Claims | 14% |
| Deductibles Increase (High-Value Projects) | 5-8% |
| Green Building Projects with Builder’s Risk Policies | 20% |
Workers’ Compensation Insurance
- Construction workers accounted for 20% of all workplace fatalities in the US in 2023, underscoring the necessity for robust workers’ compensation insurance in the industry.
- Claims related to musculoskeletal disorders in construction rose by 8% last year, mainly due to the physical demands of the job and an aging workforce.
- Average premiums for workers’ compensation in construction increased by 6.3% in 2023, driven by a rise in both claim volume and medical costs.
- The average indemnity claim in construction reached $48,000 in 2023, up from $45,000 in 2022, as medical inflation and lost wages continue to rise.
- Safety training programs in construction companies led to a 3% decrease in injury claims, particularly among firms investing in advanced equipment and protective gear.
- Construction firms using wearable tech for safety monitoring reported a 12% drop in serious injuries on-site in 2023, showcasing the impact of preventive technology.
- Mental health claims in workers’ compensation for construction workers have increased by 15% in the past year, largely due to high-stress and demanding work environments.
Professional Liability Insurance
- Professional liability claims in the construction industry rose by 9% in 2023, driven by disputes over project delays, budget overruns, and design flaws.
- The average cost of defending against a professional liability claim in construction has increased to $120,000 due to complex litigation processes and expert witness fees.
- Design errors are the most frequent cause of professional liability claims, accounting for 62% of all claims filed by construction firms in 2023.
- Contract disputes between project owners and construction firms saw a 5% increase in 2023, often leading to prolonged litigation and insurance claims.
- Engineering and architectural firms in construction typically pay 15% higher premiums for professional liability insurance than general contractors due to their design responsibilities.
- In a significant trend, 25% of construction companies now purchase project-specific professional liability policies to cover individual projects rather than general coverage, improving claim management.
- Claims related to new green building projects have risen by 7% in 2023, as more complex environmental standards lead to frequent disputes over project quality and timelines.
| Metric | Value |
| Increase in Professional Liability Claims | 9% |
| Average Cost of Defense | $120,000 |
| Design Errors in Claims | 62% |
| Increase in Contract Disputes | 5% |
| Premium Differential for Engineering/Architectural Firms | 15% higher than general contractors |
| Project-Specific Liability Coverage | Adopted by 25% of companies |
| Green Building Claims Increase | 7% |
Auto Liability: Loss Trends Continue
- Commercial auto liability premiums for construction companies rose by 11% in 2023, following increased incidents involving fleet vehicles on construction sites.
- Distracted driving incidents in construction fleets contributed to a 9% rise in claims last year, as many companies implemented stricter mobile usage policies for drivers.
- The average cost of an auto liability claim in construction increased to $92,000 in 2023 due to rising repair and medical costs following vehicle-related accidents.
- Vehicle theft claims on construction sites surged by 15% last year, driven by high demand for expensive construction equipment and parts.
- Electric and hybrid vehicle adoption is slowly growing in construction, with 5% of companies adding alternative energy vehicles to their fleets, though insurance premiums remain high for these vehicles.
- Fleet monitoring technologies like GPS tracking have led to a 10% decrease in accidents and claims among companies that adopt these tools, improving safety and reducing premiums.
- Due to increased liability, loading and unloading accidents accounted for 25% of all auto liability claims in construction in 2023, showing the need for improved training and safety protocols.
| Metric | Value |
| Premium Increase for Auto Liability | 11% |
| Distracted Driving Claims Increase | 9% |
| Average Cost per Claim | $92,000 |
| Vehicle Theft Claims | 15% increase |
| Alternative Energy Vehicle Adoption | 5% |
| Accident Reduction (due to Fleet Monitoring) | -10% |
| Loading/Unloading Accidents Share | 25% of claims |
Excess Liability: New Entrants Create More Competition
- Excess liability insurance in construction now has more competitive pricing, with new insurers entering the market and pushing premiums down by an average of 4%.
- Increased claims frequency has led to higher retention levels in excess liability policies, with construction firms now bearing up to 15% more in self-insured retention.
- Environmental liability coverage in excess policies grew by 18% in 2023, reflecting heightened awareness of potential pollution liabilities in construction projects.
- Large-scale project risks prompted 20% of firms to seek excess liability policies with higher aggregate limits, often reaching up to $50 million in coverage.
- Due to evolving project risks, deductibles for excess liability increased by 6% on average, requiring firms to manage a larger portion of initial claims.
- Construction firms with high-risk profiles saw excess liability premiums rise by 7%, primarily due to their involvement in infrastructure or public works projects.
- Cyber risk endorsements are now included in over 30% of excess liability policies for construction companies, addressing the rising need for digital risk coverage.
Property/Inland Marine: Natural Disasters Drive Losses
- Hurricanes, wildfires, and floods led to a 20% increase in property insurance claims for construction firms in 2023, illustrating the impact of climate-related events.
- Premiums for inland marine insurance on construction equipment rose by 8% last year as natural disasters frequently damaged machinery and materials.
- The average inland marine claim reached $55,000 in 2023, up from $50,000 the previous year, largely due to extreme weather and increased equipment values.
- Fire damage claims alone accounted for 15% of all property insurance claims in construction in 2023, emphasizing the importance of fire-resistant materials and protocols.
- The frequency of flood-related claims in inland marine policies surged by 12%, with insurers urging construction companies to consider higher limits for flood-prone regions.
- Earthquake endorsements are now included in 40% of property insurance policies for construction in at-risk areas, highlighting a growing trend in region-specific coverage.
Construction companies reported increased costs for natural disaster insurance as more projects opt for additional coverage to protect against these unpredictable risks.
Directors & Officers Liability and Employment Practices Liability
- Directors and officers (D&O) liability claims for construction companies grew by 10% in 2023, largely due to litigation around environmental compliance and project mismanagement.
- Employment practices liability insurance (EPLI) premiums increased by 5% as claims related to workplace harassment and discrimination rose in the construction industry.
- The average settlement for a D&O claim in construction reached $110,000 in 2023, reflecting the increasing cost of defending and resolving disputes.
- Whistleblower claims in the construction sector spiked by 12%, often linked to safety violations and compliance issues, intensifying demand for D&O coverage.
- With more stringent labor laws, wrongful termination claims accounted for 28% of EPLI claims in 2023, highlighting the need for clear employment policies in construction.
- Over 40% of construction companies now include EPLI policies to cover claims around employee treatment, safety, and discrimination, as regulatory scrutiny intensifies.
- Environmental responsibility lawsuits targeting construction executives have risen by 7%, pushing firms to secure more comprehensive D&O policies with additional environmental liability endorsements.
Coverages in Liability Insurance for Construction
- General liability insurance remains a staple, covering 75% of claims in construction, including third-party injuries and property damage.
- Pollution liability insurance policies saw a 9% increase as more construction firms sought protection against environmental risks, especially on large, complex projects.
- Umbrella liability coverage is now carried by 52% of US construction firms, providing an additional layer of protection beyond standard liability policies.
- With 38% of claims arising from subcontractor work, many construction companies now require subcontractors to carry their liability insurance policies.
- Completed operations insurance grew by 5% in 2023, reflecting rising concerns over post-completion defects and property damage claims.
- Premises liability claims on construction sites increased by 7%, underscoring the importance of liability insurance for any physical hazards posed by ongoing projects.
- Product liability insurance for construction materials and equipment manufacturers experienced a 6% rise in premiums due to the complexities of supply chains and potential defect issues.
Updates to Construction Insurance Costs
- The average construction insurance premium in the US rose by 8.5% in 2023, driven by inflation, labor costs, and rising claim frequencies.
- Builder’s risk insurance costs increased by 12%, particularly for projects in disaster-prone areas, as insurers recalibrate rates based on geographic risks.
- Deductibles on general liability policies for construction companies have grown by 4-6% due to higher claim volumes and the cost of resolving complex disputes.
- Workers’ compensation premiums are expected to rise another 6% in 2024, as construction firms face high injury rates and ongoing labor shortages.
- Premiums for cyber insurance in construction surged by 15% due to an increase in ransomware attacks targeting large-scale infrastructure projects.
- Inland marine insurance premiums have seen a 7% increase as companies insure high-value equipment against theft, vandalism, and natural disaster damage.
- The use of risk management technology—like predictive analytics and AI-driven risk assessments—has helped reduce insurance costs by up to 5% for companies investing in these tools.
Technological Developments and Innovation in Risk Mitigation
- Drones are now used by over 30% of construction firms for site inspections, enhancing safety and reducing manual risk assessments by 40%.
- Wearable technology, such as smart helmets and vests, led to a 14% reduction in workplace injuries on monitored sites in 2023, reflecting the positive impact of on-site safety monitoring.
- Predictive analytics tools help 42% of construction companies assess risks in real-time, reducing preventable incidents and aiding in insurance premium negotiations.
- IoT sensors in construction sites have grown by 20%, monitoring environmental conditions, equipment status, and worker health, thus helping mitigate risks.
- AI-driven risk assessment platforms help companies identify potential hazards early, cutting insurance costs by up to 7% for firms adopting these solutions.
- Building Information Modeling (BIM) allows 50% of large construction firms to simulate project stages digitally, helping them identify risk points and streamline insurance requirements.
- Cybersecurity software investments have increased by 13% in the construction sector, as companies protect against data breaches and ensure compliance with data protection regulations.
| Technology | Adoption Rate | Impact |
| Drones | 30% | 40% reduction in manual risk assessments |
| Wearable Technology | Increased by 14% | Reduction in workplace injuries |
| Predictive Analytics | 42% | Lower incidents and premiums |
| IoT Sensors | 20% growth | Improved monitoring on sites |
| AI-driven Risk Assessment | Reduces costs by up to 7% | Risk identification and reduction |
| Building Information Modeling (BIM) | 50% | Risk assessment and simulation |
| Cybersecurity Investments | 13% | Protects against data breaches |
Recent Developments in the Industry
- The construction insurance market is projected to grow by 6.5% annually, reaching an estimated $18.6 billion by 2025, as global infrastructure demands surge.
- Environmental, social, and governance (ESG) factors are influencing insurance policies, with 28% of insurers offering discounts for sustainable building practices.
- Climate risk has become a central focus, with 34% of policies now including flood, wildfire, and hurricane endorsements in high-risk regions.
- Public-private partnerships (P3) are expanding globally, with 15% more P3 projects seeking dedicated insurance solutions for long-term stability and risk sharing.
- Insurers are increasingly demanding safety certifications from construction firms, with 21% requiring proof of safety training or certifications before offering coverage.
- Data from IoT devices on construction sites is now used by 40% of insurers to assess claims and adjust premiums, as they prioritize proactive risk management.
- Labor shortages continue to impact the industry, leading 19% of construction firms to seek coverage that specifically addresses risks associated with workforce limitations.
Conclusion
The construction insurance landscape of 2024 reflects an industry rapidly evolving to keep pace with complex demands and new challenges. As firms face mounting pressures from climate-related risks, workforce challenges, and digital threats, securing the right insurance coverage becomes essential. Technological advancements, such as AI-driven risk assessments, drones, and IoT-enabled sensors, are transforming risk management, enabling companies to optimize safety and reduce premiums. Furthermore, the industry’s focus on sustainability and regulatory compliance will continue to shape policies, as insurers prioritize clients who meet ESG criteria. For construction firms, staying informed about insurance trends is not only crucial for protecting assets but also for navigating an increasingly complex risk environment.
Sources
Barry Elad
Barry Elad is a dedicated tech and finance enthusiast, passionate about making technology and fintech concepts accessible to everyone. He specializes in collecting key statistics and breaking down complex information, focusing on the benefits that software and financial tools bring to everyday life. Figuring out how software works and sharing its value with users is his favorite pastime. When he's not analyzing apps or programs, Barry enjoys creating healthy recipes, practicing yoga, meditating, and spending time in nature with his child. His mission is to simplify finance and tech insights to help people make informed decisions.
