The construction market is showing hints of improvement, if only slightly, according to insurance specialists for this market.

The contractor class has been one of the hardest hit by the financial crisis and three years later it is nowhere near where it was before the problems began. But, say underwriters, it is better, and that may be all anyone can hope for at this point.

"From a renewal standpoint, for accounts we have had for the last couple years, we are seeing receipts for those insureds go up and that is positive," says Ryan Grimes, senior vice president of the Northeast and Western Regions of All Risks, Ltd. "Two years ago they were still going down and now they are going up. We are also seeing additional premiums on audits for accounts we have written so that is good news."

Grimes says financing for construction projects is still a challenge, but there is more confidence than there was in building projects centered around smaller residential communities, condos, townhouses and duplexes, and it is now a little easier to get those funded.

"There is also an increase in investment groups buying distressed properties and putting money into them all around the country," he says. "There is definitely a trend with buying properties that were abandoned or foreclosed upon."

Of course, the rate of improvement depends on the geographic region of the country and how hard hit that region was when this whole mess began. California, Florida and Georgia have suffered more than other states, say agents, and have been slower to recover.

"California is unique because home prices had skyrocketed so high [before the recession] that it made the fall so much harder," says Jeana Ramos, vice president of Continental Risk Insurance Services, DBA, located in Lodi, Calif. "Other states that haven't been hit near as hard are still doing well with jobs."

Cady Sinks, assistant vice president for Victor O. Schinnerer in Chevy Chase, Md., who concentrates on California and Georgia, says she is cautiously optimistic.

"I am definitely seeing some more stability in those areas which is fantastic to see. I am not seeing the shrinkage we saw over the last few years."

The recent catastrophes could provide some additional business for contractors in the coming months, but it is not enough to really change this class.

"We need other things in the economy to happen to spur construction and build that foundation for people to start building again," says Ramos.

There is also the issue of legislation surrounding faulty workmanship and if that is defined as an occurrence. Contractors are liable either way, it is just a matter of how or if the insurance company will cover the incident if it is defined as intentional by legislation. There are a lot of questions about how that will affect contractors in those states such as Arkansas, California, Colorado, Georgia, Hawaii and South Carolina where this is being addressed.

"It certainly could become a bigger issue in other states," says Grimes. "Contractors are a court case away from big problems popping up all the time. Is that a trend or not? It is hard to know because construction is always moving and you have to pay attention to different trends and court venues around the country. It can lead to future business if you are up on that."

Contractor Agents Working Hard to Stay in Business

Those that insure this class have also been struggling. Ramos says some agencies she works with have seen their offices go from 25 people to two in the last several years because they have lost entire books of contractor business.

Ramos says there are still a lot of insureds walking away from their businesses because they can't afford to keep going. They include those who are those nearing retirement age, which has been a common occurrence this year. This isn't helping agents and brokers who concentrate on this class.

"In some of the offices we visit, morale is so low," she says. "If one unit fails, it affects the rest of the office; if you have an entire industry tank, it affects the whole company. It is a downward spiral and [these agents] are really trying to break into other parts of the industry but they are not keeping up with the pace they were doing before. It will get better, but it's hard for some people to see the light at the end."

In the meantime, agents have to work with the business they do have and be aware of all the available policy forms and their differences so they can give their clients the best possible options.

Agents also need to make sure they are fully aware of what coverages their clients need.

Ramos says many agents have branched out from working with typical contractors and into others, such as marine contractors, to get more business, but they are not educating themselves about the class. This is also true for other companies that insure contractors.

"You have different types of agents who are not familiar with this exposure and the different coverages you have to have in place versus a regular contractor," she says. "What I see from my competition is you have them trying to force a policy that is not meant for a marine contractor and coverages are left off because the other wholesaler doesn't understand it."

Grimes says agents should encourage their clients not to buy policies based on price alone, which he acknowledges can be difficult, especially right now.

"Price is all that matters for some contractors, unfortunately, and some retail partners as well, but the price is not always what it seems to be," he says. "There can be some very dangerous endorsements where coverage is not that great and it can lead to potential trouble in the future. If something is more expensive than another quote, there is probably a reason why."

All Risks has launched an online system for smaller contractors that will be nationwide by the first quarter of next year. Grimes says a big focus for them is automating the quoting process so agents and brokers can respond quickly to small contractor needs.

Victor O. Schinnerer, which writes pollution and professional liability for contractors through CNA, is seeing an uptick in interest in professional liability coverage, especially from firms that have never carried it before.

"More and more are realizing the importance of carrying [professional liability] coverage," Sinks says.

Schinnerer launched a new contractor professional liability and pollution liability form in March that targets general, design-build and many types of specialty contractors.

The new and expanded coverages include: rectification coverage; defendant's reimbursement coverage of up to $10,000 per claim; expanded definition of professional services; ownership interest of 49 percent; proactive coverage for mold; automatic coverage for LEED consultants; as well as others.

Sinks says Schinnerer enhanced the form because it wanted to clarify exactly what the insurer will and won't cover and offer what many contractors have been asking for.

The company will also announce this week that it is reducing rates in northern California for all contractor types across the board. The rate reductions are dependent on the firm and their exposures.

"In the last five years, we haven't had any rate increases or decreases, so it is nice we have been able to remain stable and keep rates where they are, and that in this big area of California we are now able to reduce rates," says Sinks.

Ramos says it's easy for agents in this class to be discouraged right now.

"Some agents are very beat up and some are on the verge of giving up," she says. "But the key to this industry is to stay positive and look towards the future and know it's going to get better."