Across the construction sector, tight margins, mounting litigation, and increasingly complex job sites are reshaping how mid-sized firms think about risk. What was once a reactive process – buy insurance, review losses – is evolving into a forward-looking strategy deeply embedded in day-to-day operations.
“It’s become less about buying a good insurance policy, and more about what level of risk is tolerable for them,” said Chris Zehnder (pictured), senior vice president and partner at The Baldwin Group. “They’re evaluating exposures that might be uninsurable or only marginally covered, and asking: what could happen given the nature of this job, location, or work type?”
Mid-sized contractors – often the backbone of local markets – have historically been cautious in adopting new risk strategies. But that caution is being replaced by a more engaged, evaluative approach. Rather than relying on historical loss trends, many firms are actively identifying risks before they materialize.
“Larger firms may use predictive modeling or digital twins, but mid-sized companies often don’t have those resources,” Zehnder said. “It’s more about hard work and brain power. They’re doing the legwork themselves to assess and mitigate risks.”
This growing focus on real-time evaluation marks a shift toward operational risk thinking. Decisions are increasingly being made with an eye to potential exposures rather than policy limits alone.
For firms operating in states like California, regulatory compliance is standard practice. “Staying on top of code changes is baked into their operations,” Zehnder said. “If anything, AI-based data aggregators could help streamline that further.”
The more pressing shift, he noted, is cultural. “The good companies aren’t relying on a single HR-slash-risk manager anymore,” Zehnder said. “They’re engaging everyone – foremen, project managers, finance, executive leadership. That collective awareness makes all the difference.”
In high-risk areas such as wildfire zones or landslide-prone regions, some contractors are choosing to pass on profitable bids if the exposure is deemed too high. “They’re not just chasing revenue,” Zehnder said. “They’re looking at the real cost of a potential claim and saying, ‘No thanks.’ That’s a big change.”
Many mid-sized firms are building risk scoring systems to guide subcontractor selection and project planning - even without access to sophisticated analytics.
“It’s not about big data,” Zehnder said. “It’s about useful data – incident tracking, near-misses, operational risk by job type.”
But putting that data to work requires discipline. “There’s no out-of-the-box program that solves this,” he said. “It takes commitment, strong management, and a culture of accountability. The frontline worker has to log the event, someone has to process it, and it has to inform decisions.”
Responsibility for this effort, he emphasized, rests squarely with the contractor. “No broker or carrier is going to build this for you. The contractor has to lead it – and that’s where we see the biggest gaps.”
Cyber liability is gaining ground among construction firms, even at the smaller end of the market. But understanding what coverage is actually in place remains a challenge.
“It’s not just complex threats – most losses are simple, like fraudulent emails requesting a change in bank account details,” Zehnder said. “And these are still happening.”
The problem, he added, is that cyber policies are often misunderstood. “Even brokers struggle with them. Construction firms rely heavily on external IT and their brokers, but the policies are manuscript, varied, and rarely well-explained. That’s a growing risk in itself.”
Some firms are exploring parametric insurance for specific exposures, drawn by the promise of speed and predictability in claims handling.
“The speed of payout is the draw,” Zehnder said. “For risks like earthquakes, having a supplemental policy that responds automatically can be a game-changer.”
But in Zehnder’s view, lasting success will come from something more fundamental: treating risk as a shared, strategic concern across the entire organization.
“The ones doing well aren’t just checking boxes,” he said. “They’re building risk awareness into how they bid, build, and lead.”
For construction firms navigating today’s uncertain terrain, risk isn’t just a cost center – it’s a leadership imperative.
