Margins Under Pressure: Why Agents Are Key to Builders’ Insurance Savings

By Oscar Farias, VP of Sales Engagement

Global economic growth is projected to decelerate in 2025, with the OECD forecasting a slowdown to 2.9%, influenced by escalating trade tensions and tariff policies. In the United States, these economic headwinds impact various sectors, including construction. Despite these challenges, urban development persists, with mixed-use, infill, and vertical projects continuing to reshape city landscapes.

Construction firms contend with inflationary pressures, labor shortages, and material cost volatility. According to JLL's 2025 U.S. Construction Outlook, material costs are anticipated to rise between 5% and 7%, further tightening project margins. In response, builders are scrutinizing budgets more closely, identifying areas for potential savings. Insurance, often a significant line item, is under review—not necessarily for reduction, but for optimization. In this context, insurance agents play a pivotal role in helping construction clients navigate their coverage options effectively.

As the insurance market shows signs of softening in 2025, agents are uniquely positioned to guide construction clients through evolving coverage options.

The Financial Forecast: Slower Growth, Tighter Margins

In the United States, inflationary pressures remain a concern. Analysts anticipate that tariffs could lead to a resurgence in inflation, with core inflation projected to rise to 2.9%, signaling a drift from the Federal Reserve's 2% target. Despite these inflationary trends, the Federal Reserve is expected to maintain its current interest rate range of 4.25%-4.50% through early 2026, adopting a cautious stance amid prevailing economic uncertainties.

Furthermore, according to Economics Insider, the U.S. federal government is projected to face an approximately $1.8 trillion budget deficit in fiscal year 2025. This significant deficit may limit the government's ability to provide long-term support for industries such as construction.

Impact on Construction

Rising Costs: Developers and contractors are grappling with increased expenses due to persistent inflation and higher material costs, leaving little room to expand pricing.
Project Delays and Financing Pressures: Elevated interest rates contribute to higher financing costs, adding pressure to project timelines and budgets.
Insurance Scrutiny: With tighter margins, insurance premiums—especially for specialized lines like builders’ risk—are being scrutinized closely as firms seek cost-saving opportunities.

In this challenging economic landscape, construction firms must reassess their financial strategies, and insurance, often a significant line item, becomes a focal point for potential savings. With their expertise, insurance agents are crucial in guiding clients through these evaluations, ensuring that coverage remains adequate while aligning with budgetary constraints.

Where Insurance Fits Into the Cost Conversation

In the current economic climate, construction firms are meticulously evaluating every aspect of their budgets to identify potential savings. This scrutiny extends beyond materials and labor to encompass insurance programs, which, while essential, represent a significant recurring expense. As firms seek to optimize costs without compromising coverage, insurance becomes a focal point in financial planning.

Common Contractor Cost-Saving Areas

Equipment Leasing Terms: Reassessing leasing agreements to ensure favorable terms and prevent overpayment.
Subcontractor Scopes: Evaluating subcontractor roles and responsibilities to eliminate redundancies and enhance efficiency.
Material Sourcing: Exploring alternative suppliers or materials to reduce costs without sacrificing quality.
Insurance Programs: Reviewing existing insurance policies to identify opportunities for cost savings through adjustments or alternative options.

Why Insurance Draws Attention

Recurring Expense: Insurance premiums are a consistent financial obligation, making them a prime candidate for cost optimization.
Intangible Nature: The lack of immediate, tangible benefits can lead firms to question the value of their current insurance programs.
Policy Reevaluation: Mid-project assessments of policies like builders’ risk, inland marine, or commercial auto insurance can reveal areas for adjustment to better align with current needs.

What’s Being Rethought

Coverage Layers: Analyzing the necessity of excess layers, testing coverage, or off-site protection to determine if adjustments can lead to savings.
Deductibles and Carrier Appetite: Considering higher deductibles or alternative carriers, especially in light of increased weather-related risks.
Policy Structure: Deciding between consolidated coverage versus piecemeal policies to find the most cost-effective and comprehensive solution.

As construction firms navigate these financial considerations, insurance agents play a pivotal role in guiding clients through the complexities of policy adjustments and optimizations. Their expertise ensures that cost-saving measures do not compromise essential coverage, maintaining the delicate balance between fiscal responsibility and risk management.

The Agent’s Role: Clarity, Comparison, and Confidence

As the insurance market shows signs of softening in 2025, agents are uniquely positioned to guide construction clients through evolving coverage options. With increased carrier flexibility and competitive pricing, agents can help clients navigate the complexities of policy adjustments to align with budgetary constraints.

Why Agents Matter More in a Softening Market

Market Comparison: Agents can assess a broad spectrum of carriers and products, ensuring clients receive the most competitive and suitable coverage options.
Coverage Clarification: They assist in identifying essential coverages, helping clients prioritize protections that align with their specific operational risks.
Operational Insight: By understanding the unique exposures of each client, agents can tailor insurance solutions that address specific project needs and financial considerations.

Workplace Considerations for Brokers and Employers

Strategic Shopping: Evaluating multiple carriers to find cost-effective solutions without compromising on critical coverages.
Trend Monitoring: Keeping abreast of underwriting trends and carrier appetites to inform clients of emerging opportunities or necessary adjustments.
Flexibility Guidance: Advising clients on which policy elements offer flexibility and which are essential, facilitating informed decision-making.

In a market where insurance conditions are shifting, agents serve as vital advisors, helping construction firms adapt their insurance strategies to current economic realities. Their expertise ensures clients maintain robust coverage while optimizing costs, fostering confidence in navigating the evolving insurance landscape.

As firms seek to optimize costs without compromising coverage, insurance becomes a focal point in financial planning.

Conclusion

As construction firms examine every line item on the budget more closely, insurance continues to stand out as an area where reassessment—not reduction—can yield meaningful impact. With economic uncertainty and cost pressures building, firms are reconsidering how their insurance programs fit into broader financial strategies.

Agents who understand the pace of the market and the nuances of construction operations are well-positioned to help clients navigate this landscape. In a margin-tight environment, thoughtful adjustments and informed perspectives can go a long way, and insurance professionals are often the ones bringing clarity when it matters most.

Oscar Farias is Vice President of Sales Engagement of Builders & Tradesmen's Insurance Services, Inc., an Amynta Group Company.

Builders & Tradesmen’s Insurance Services Inc.

BTIS is committed to providing robust, individualized products and the highest level of service. Our easy-to-use commercial insurance platform, educational tools, and helpful underwriters make it simple for producers to diversify their books of business by expanding their product portfolios.

Part of the Amynta Group, BTIS is a nationwide insurance intermediary with a small-business attitude. We believe in building solid relationships through communication and a genuine concern for the success of our retail broker clients and the policyholders they serve.

For additional information, visit www.btisinc.com or call (877) 649-6682