New technologies to transform how we insure construction

"Shift happens: digital disruption is impacting the evolution of the built environment." -Philipp Dohmen, Amberg Group

This was the key message that emerged from the Expert Hearing on Automation in the Construction Industry attended by 40 Swiss Re experts and industry speakers at the Swiss Re Institute's Centre for Global Dialogue on 27 February, 2018.

Greg Schiffer, the head of Swiss Re Global Engineering, in his welcome to participants emphasized that an expert hearing is designed to promote dialogue between leading industry practitioners and risk experts to explore emerging trends and opportunities. External industry speakers were invited to offer their views on the following questions:

  • What are today's drivers of change in the construction industry?
  • How fast is the future coming and are businesses and insurers ready for it?
  • What can insurers do to cover emerging risks associated with these changes?

During the morning sessions, speakers addressed these issues from a wide range of perspectives. Paul Curschellas of Bauen Digital Schweiz presented digitalization as the game changer for construction. This will require adoption of new standards and innovative insurance covers. Both the insurance and construction sectors will benefit from the increase of available data if they can align their interests. However, the construction companies are still working using traditional information systems, although advanced digital applications are available. This leads to 8% higher losses on construction projects. To illustrate the availability of advanced construction technologies, Henry Unterreiner and Alvise Simondetti from the construction consultant Arup, presented pilot projects in robotic fabrication and examples of how technology is facilitating high frequency collaboration on projects. Alvise introduced the observation that in the vast array of possible futures, from the Ikea-type catalogue to the crowd sourcing, data was always the key.

Global trends are also driving changes in the industry. Patrice Nigon, of Swiss Re Global Engineering, explored how energy transition, climate change and population growth directly or indirectly impact both the construction industry and the reinsurance industry. He demonstrated that innovation is extremely challenging for the reinsurer, although very important and useful.

During the afternoon sessions, speakers presented innovative new technologies and demonstrated how they were effecting construction practices. Different technologies are closer to commercial exploitation, while other are more futuristic.

Drones for example, are everywhere and their commercial applications in construction are already widely recognized. Benjamin Pinguet from the drone manufacturer senseFly, offered concrete case studies of how drones are disrupting traditional practices on the construction site, providing his thoughts on how the insurance industry could leverage this new technology.

Building Information Modelling (BIM) is now established and here to stay according to Antoine Réolle of the contractor Losinger Marazzi. While converting concepts into practice is full of challenges, gains in quality or health and safety make it unthinkable not to use it. Further in the future are the digital fabrication methods that were presented by Professor Robert Flatt of the NCCR dFab research group at ETH Zurich. Think different, build different was his central message. Value will come when added functionality can be delivered by these innovative methods. He provided an example on of a new construction method based on system integration that could improve significantly space utilization but were different for insurers in terms of traditional methodologies used in underwriting risks in this sector.

The expert hearing also included two discussion where speakers and experts exchanged views about their different practices and mindsets. A key observation that emerged in discussions was the high degree to which new technologies in the construction would challenge insurers to develop new approaches to understanding and evaluating risk on the construction site. Reinsurance covers have not substantially changed for over 30 years and are dated in many ways. When the industry speakers quizzed Swiss Re's experts on whether the insurance industry could change with the times, participants replied that reinsurers have previously demonstrated a willingness to work with industry to come up with new coverages and solutions. One example cited was the solar panel warranty. However, asymmetry of information and misalignment of interests between contractors and insurers may be the biggest barrier to overcome in realizing gains. The exchange of secure, reliable and transparent data was proposed as the key to overcoming many of these hurdles to change and all the participants agreed that leveraging such data sources would be the best way to prepare for the future.

The two industries gathered for this event will be faced with disruptive changes in the near future. There are multiple players in the construction industry looking at different construction methods, new materials, innovative processes and better ways to communicate and collaborate along the value chain. Although different visions of how the industry will change were presented, the exact form these developments would take is less clear. A question asked by most Swiss Re participants is how these technological developments will be mirrored on premium trajectories, which depends on the evolution of the associated risk. The risks may shift and covers need to adopt accordingly. From the viewpoint of the experts in the room, it was clear that most believe BIM will have a major impact on the construction industry in the near future. Reinsurers should consider to get more involved in industry initiatives related to standards on BIM as the information required to calculate new risks sit in these integrating systems. For partnerships in this field to grow, reinsurers should be involved in earlier stages of new technology standardization. Insurance is often an afterthought but limits the ability of insurers to offer more cost effective and complete coverage.

Swiss Re participants at the Expert hearing concluded that it is vital to stay closely involved with key industry players and continue to learn as much as possible about the innovative technologies and practices that are shaping the future of construction.

Summary of the Automation in the Construction Industry in February 2018. Summary written by Henry Erulin and Richard Francis.

Summary of the Automation in the Construction Industry in February 2018. Summary written by Henry Erulin and Richard Francis.