Building contractors

Building contractors

Surrago, James

Sometimes it seems next to impossible to line up building contractors to bid on work you need done around the house-for example, a major addition or renovation-or construction of a new home, office or other commercial structure.

This is somewhat of an anomaly, given that nearly 197,000 building/construction businesses operate in the United States. Only the restaurant industry, with more than 420,000 establishments, is larger than the building/construction business in the country.

In 1998, building/construction establishments represented $3.3 billion in annual insurance premium and employed an estimated 1.3 million people.

The economic boom underway in the United States has had a positive effect on this industry. In the five years from 1994 to 1999, employment in the construction business grew 15.6%, while direct written premium increased by 2.4%. By year-end 2001, employment in building/construction is expected to grow an additional 2.2%, but premiums are expected to drop 1.9%.

Workers compensation, general liability, inland marine and surety represent 94.7% of the $3.3 billion in premium.

Most of the businesses-nearly 186,000, or 94.30/c-are small, with fewer than 20 employees. And, of those, almost 170,000 establishments, or 91%, employ fewer than 10 individuals. Countrywide, small building/construction businesses account for $1.8 billion in premium, or 53% of the total, with an average premium of about $9,500 per account. Another 10,000 establishments, or 5.1%, are medium-sized accounts-that is, those employing between 20 and 99 individuals. These establishments account for $964 million, or 29.1% of the total, with an average premium of $96,500 per account. Only about 1,100 risks each employ more than 100 people and account for $594 million, or the remaining 18%, of the $3.3 billion market in premiums. These large risks generate an average premium of $520,000 per account.

In the Rough Notes Midwest region, 37,000 building contractors employ 228,000 people and represent $556 million in premium volume. Of these 37,000 risks, 35,400, or nearly 95% of the total, are small and account for $316 million, or 56.8% of the total market in premiums. The average premium for these small risks is about $8,900 per account. Slightly more than 4.6% of the risks are mid-sized accounts that generate $154 million in premiums, or 27.6% of the total market. The average premium per account for these risks is $88,800. Risks employing more than 100 people are 15.5% of the region’s premium market, and the average premium is almost $480,000 per account.

Information on this and other niche markets is available from ISO by calling toll-free: (800) 888-4ISO ((800) 888-4476); e-mail:

James Surrago is vice president, data management and information services of the Insurance Services Office, Inc.

Copyright Rough Notes Co., Inc. Mar 2001

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