New construction techniques like mass timber, modular manufacturing, and robotics are becoming more popular because they save money and cut down on labor. But these new methods are also creating problems for insurers and developers. They face fewer insurance options, higher costs, and tighter limits when choosing coverage.
Kris Bauer, Senior Vice President of Construction at Jencap Group, says projects using these newer building styles often have 20 to 40 percent fewer insurer choices than standard concrete, steel, or traditional wood-frame buildings. This can make it harder and more expensive to get insurance.
The construction world is changing. More builders are using modular methods, where building parts are made in factories and then moved to the site for quick assembly. Mass timber products like cross-laminated timber (CLT) help reduce the need for steel and concrete and lower labor demands. These changes come partly because of supply chain problems, tariffs, and rising labor costs in some areas.
Modular building is especially attractive because it allows parts to be built in cheaper locations and sent to expensive cities like San Francisco for fast installation. This cuts costs and saves time. But the insurance industry is still trying to catch up. Insurers worry because there isn’t much data on how mass timber or modular buildings hold up over many years. This makes it tough to know the risks, so insurance prices tend to be higher.
A study by Gen Re found that timber-based construction could cost more than twice as much to insure compared to masonry buildings because of uncertain risks related to fire and water damage. Bauer explains that when developers choose techniques like CLT or modular, they lose a big chunk of potential insurers. That limited pool drives prices up, so builders must balance construction savings against the higher insurance costs.
Insurance capacity is even tighter in places prone to extreme weather, such as coastal Florida or Hawaii. Here, fewer insurers are willing to cover projects built with these newer methods, especially residential ones.
Looking ahead, technologies like robotics and 3D-printed homes could soon join the mix. Robotics is already being tested in modular factories but is still expensive. As costs come down, more builders may use these tools, and insurers will have to adjust. These advanced methods also bring new risks like cyber threats and questions about how durable they will be long term.
Bauer predicts that the Excess and Surplus (E&S) insurance market will lead the way in covering these new risks because it’s more open to unusual cases. He says insurance options will grow once there’s enough data showing how these buildings perform over time.
For now, developers should get help early from brokers who know how to prepare detailed insurance submissions. Explaining the experience of the builders, quality checks, and how materials are tested can help convince insurers to offer coverage. Developers also need to weigh the potential savings in construction against higher insurance costs and fewer coverage options. The insurance industry is still cautious, so these non-traditional builds come with an “innovation premium.”
Some insurers avoid these complicated risks completely. Others will offer quotes only if given detailed information, and a small group is more willing to take on these challenges. But for the moment, that’s not common.
Overall, emerging building methods show promise for lowering costs and speeding up construction. But until more data is available and the insurance market adjusts, developers must prepare for higher premiums and limited insurer choices.