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Giving construction insurance a new lease of life

At a glance

  • By developing a joint life and non-life approach to the market, Zurich is offering something unique in the construction sector
  • Construction is the first sector to be targeted with Zurich’s ‘vertical’ approach; utilities and financial services are set to follow

A new service from Zurich is creating a buzz in the construction market. By joining its burgeoning Corporate Life & Pensions unit with an already well-established and market-leading global non-life unit, Zurich is offering some unique thinking to the sector.

“Construction is intensive on assets and intensive on people; providing huge opportunities for insurers on both non-life and life,” says Joana Martinho, PMO and Strategy Manager for Zurich Corporate Life & Pensions.

“The majority of construction firms have extremely complex needs and work across borders, making a truly international life insurance solution so important for these firms.”

“That is why it makes sense to create a ‘vertical’ approach in construction, by bringing together different lines of business, providing a single approach to the customer,” adds Stephan Hillert, Global Distribution Manager for Zurich Corporate Life & Pensions.

Complex needs

Zurich, one of the world’s largest insurance groups, operates out of more than 170 countries.

“Several years ago, Zurich Global Corporate launched its non-life international programme, allowing companies to get coverage across different lines of business in one master policy – all with one single point of contact at Zurich,” says Stephan.

Zurich has since developed international solutions on both death and disability (life risk) and savings to support these companies. The construction industry is a key market for these solutions with its strong concerns about the attraction and retention of talent (particularly in specialised functions) and workers safety.

White collar managers can be hard to recruit to the construction industry. With many project managers or engineers working on a project basis, moving people from country to country is the norm and this mobility may cause problems. Workers are often not on a job long enough to be part of a single social security system, and therefore have no pension plan. They may also be working in emerging economies where the social safety nets are still weak or where local insurance for death or disability is underdeveloped.

An international pension plan solution or a group risk solution may solve these challenges. This ensures employers can move people around the world as required without having to worry about whether their benefits are in place or needing to send people for endless medicals.

Meanwhile, blue collar construction workers face varying degrees of employment law and benefits, but there is an overall trend towards a higher degree of protection in many countries. A recent example is Qatar, which is implementing a series of labour reforms including better provision of employee benefits.

Holistic approach to risk

Construction workers face many unique risks in their day-to-day job. Zurich looks at these risks holistically to ensure business is priced fairly. Most construction companies invest heavily in risk reduction around assets – often in conjunction with their Zurich general insurance risk consultant. We bring that information into employee benefit pricing, financially rewarding companies that seek to make the workplace safer.

An alternative capital solution for large companies is self-insurance through captives – particularly for property and casualty insurance. Increasingly, construction firms are exploring the many benefits of including life as well as non-life risks in their captive programmes. Putting life benefits into a non-life captive allows for better control and risk-management. It also ensures a more holistic view of the risks each construction company is facing – something that is invaluable for the risk professionals within the company.

For European companies, the benefits are even greater. “With Solvency II coming into play, operating a cross-class captive with Zurich’s help will mean companies won’t need to hold as much capital,” says Joana.

Domestic solution

We are also looking at a joined up approach across our life and non-life units and have developed joint propositions. This enables companies to deal with Zurich once and get all the associated risks covered in one solution. A solution that covers Accident & Health and Death & Disability was recently launched in Italy, effectively providing an integrated management view to our corporate customers of all the risks – life and non-life – regarding their employees.

This makes implementation simpler for the construction company whilst ensuring claims are easier for the employee.

Construction focus

The construction industry was badly affected by the financial crisis, with an estimated five million workers globally losing their jobs during 2008 alone.

In Europe there are ongoing concerns. The tide seemed to be turning for the industry by the beginning of 2015, but latest figures show construction in the Eurozone fell sharply in February, prompting worries that the slight economic recovery on the continent was not flowing through to investment in new projects.

The EU’s statistics agency Eurostat said construction fell 1.8% from January and 3.7% from February 2014. The figures were worst in Germany, where construction activity dropped 3.1% compared with January and 8.1% compared to the previous year.

In spite of worrying signs in Europe the U.S. market seems to have passed the crisis, with the number of people employed in the sector taking a dip from 7 million to 5 million during the crisis but fast recovering with 6 million people employed today.

Construction is intensive on assets and intensive on people; providing huge opportunities for insurers on both non-life and life”

Joana Martinho, PMO and Strategy Manager for Zurich Corporate Life & Pensions

A 2013 McKinsey study indicates the need for a $57 trillion investment in infrastructure until 2030, just to keep pace with the anticipated growth. This represents $3 trillion investment per year in roads, power, water, telecom, rail, ports and airports across the world.

“It is a very interesting market for us and one we are focusing on with our new joined-up approach, especially as new regulations come into play in Europe and as many emerging markets grow through the construction industry,” says Joana.

“But there are other industries and sectors that could also benefit from this vertical approach, for example the utilities sector – with its huge amount of assets to protect – and also financial services, which has assets, people and complexity,” adds Stephan.

“Zurich’s vertical approach is also supporting and supported by our distribution partners who bring expertise across various lines of business, providing a value added service to corporates across specific industries. We are excited to continue to work closely with them in developing innovative solutions to our customers in construction and beyond.”

For more information please speak to your local Zurich contact.

Image © Getty

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