More modular, new risks

The world’s largest modular construction building opened in Brooklyn, NY, in late 2016. Approximately 90% of 461 Dean, a 32-story apartment complex, was built in a factory in the Brooklyn Navy Yard, enabling the developer to save about 20% on construction costs.1

With construction costs on the rise, and the quality and convenience of modular construction improving, more of your contractor clients are likely to turn to it as a viable and profitable option. In fact, industry experts predict the modular construction segment will grow about 6% over the next several years.2


Modular constuction is expected to become a $200 billion industry by 2027.3


The move to modular

What’s the appeal? In addition to reducing construction costs, the inside, controlled work environment of modular construction also can:

  • Increase employee safety because assembly on a factory floor minimizes height exposure and the likelihood of falls, which is the leading cause of fatal construction accidents
  • Decrease build time by 30% to 50% because weather does not impact the work schedule. Additionally, tasks can be completed simultaneously
  • Reduce potential damage to materials and equipment from extreme temperatures and moisture

Risks to consider

With the benefits of modular construction enticing more contractors to give it a try, you may have the opportunity to counsel your construction clients about having the right insurance solutions in place to protect themselves from the potential risks.

For example, fabricating large building elements offsite can require more cranes and heavy equipment onsite, signaling a need to review property, marine and general liability coverages. More equipment onsite could result in more theft, increasing an already big risk contractors face.

The National Equipment Register (NER) estimates the annual value of stolen construction equipment ranges from $300 million to $1 billion.4 How recently have your clients assessed the total value of their equipment and other property and adjusted their insurance to reflect changes?

Unanswered questions

Though modular construction has been around for decades, its increased popularity has introduced some new questions about risk and who owns it, including:

  • What happens if damage or defects are detected during the onsite construction process?
  • Who is responsible for costs associated with delays due to the manufacturing process?
  • What contingencies and protection should be in place should pieces be damaged during transportation?

Build tailored coverage

One step your contractor clients can take to protect themselves is to enter into contracts that clearly define roles, responsibilities and risk ownership. Another is to partner with you and Hanover construction experts to identify hazards, implement controls to mitigate risk and tailor the coverages needed, including builder’s risk, property, general liability, workers’ compensation, umbrella and more.

1Business Insider
2 UA Builders Group
3Modular Construction Market, by Type Material, End-use sector, and Region - Global Forecast to 2023
4Construction Connect