The construction industry is facing serious challenges as supply chain issues continue to disrupt project timelines and increase costs. From shortages of electrical panels to delays in getting pickup trucks, these problems are affecting not just construction but also the insurance landscape. Brent Aycock, a managing director at Higginbotham, shared insights on the current state of affairs during a recent discussion.
Aycock, who has experienced various economic downturns, believes that the current market is tougher than anything seen before. He compared today’s challenges to the hard market of the late 1980s, the real estate crash, and the aftermath of 9/11, stating that none of those periods prepared him for the difficulties faced today.
In 2023, the U.S. life insurance market reported $193.59 billion in direct premiums, highlighting the scale of the industry. Meanwhile, non-life insurance premiums have surged globally, increasing by 10.9% due to rising policy rates and inflation. Aycock serves clients in various sectors, including oil and gas, agriculture, healthcare, and construction. He noted that while Texas’s economic diversity usually provides some stability, even resilient industries like oil and gas are feeling the strain.
The construction sector, in particular, is grappling with material shortages that leave projects stalled. Aycock pointed out that without essential supplies like windows, doors, and electrical panels, construction timelines are dramatically affected. This leads to not just delays but also financial repercussions. As projects get pushed back, sales projections shift, audits become complicated, and insurance premiums rise unexpectedly.
Aycock emphasized the ripple effects of these delays, explaining that even the availability of work trucks has caused significant operational issues. At one point, sourcing pickup trucks became nearly impossible, impacting industries that rely heavily on mobility.
Safety is also a growing concern as deadlines loom. Aycock noted a rise in accidents on job sites, with workers rushing to meet schedules. This urgency has led to preventable incidents, such as electrocutions and falls. The pressure to deliver on time, despite setbacks, is creating a precarious environment for workers.
Insurance underwriters are facing their own challenges as they justify higher rates to clients who are already struggling financially. Many clients are bound by contracts that require specific levels of insurance, making it increasingly difficult to meet those demands.
Aycock expressed uncertainty about whether this situation is a new normal or just a prolonged rough patch. He receives weekly calls from clients who are rethinking their business models to stay afloat. While he acknowledges the ongoing shortages, he also believes in the American spirit of entrepreneurship and adaptability.
Despite the resilience shown by many, Aycock sees little hope for immediate relief. He mentioned the need for some form of tort reform but remains skeptical about its likelihood. As the construction industry grapples with these ongoing challenges, the path forward remains unclear.