More Available, But Still Costly

NEW ORLEANS -- Builders received mixed news regarding the future of insurance and their ever-increasing obligation to manage construction risks at the 2003 Benchmark Builders Conference.

Stan Luhr, president of Quality Built, a Poway-based, quality-assurance firm, addressed convention-goers and predicted there will be more insurance coverage available to builders by year's end. Deductible limits, however, will be very high, he said.

While insurers are coming into the market, they are requiring that homebuilders become their own claims department.

"With SIRs (self-insured retentions, or deductibles) in the $150,000 to $250,000 range, builders will be forced to effectively handle claims and resolve them without the insurer's input," Luhr said.

To counter this added risk, builders will need to redouble their quality assurance efforts on the job, increase their sophistication with customer service and permanently resolve conflicts, he added.

In a major development, Luhr predicted that in the next 12 months, nearly all major insurers will require home builders to conduct third-party risk reviews as well as perform quality assurance inspections during the course of construction.

"To attract insurers, builders must adopt a culture and system for proving they are building a durable product," Luhr noted.