How Technology Startups Are Saving Lives, Property in Construction Segment

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by Martha NotarasĀ 

Construction has a major problem: every year, construction sites suffer $11 billion in losses due to damage from fire and water, worker accidents, and theft. In addition, a fifth of all worker deaths in the U.S. – nearly 1,000 in 2016 alone – occur on construction sites.

To date, many startups in construction tech have focused on increasing productivity. Unlike most other major sectors of the economy, which have doubled their productivity in the last 20 years, productivity in the construction industry has been incredibly stagnant. As in other verticals, the technology industry has risen to this challenge and is offering new tools to construction companies.

Since 2009, nearly 500 companies have been funded in construction tech, raising $4.3 billion. Companies in construction tech range from seed stage startups to more developed late-stage companies like Katerra, which raised $865 million in early 2018. Most of these companies are seeking to increase efficiency via better planning, communication, logistics, contractor collaboration, document digitization and analytics to identify potential setbacks on the construction site.

Meanwhile, another seemingly unrelated technology vertical has developed: insurtech. Insurtech is about driving efficiencies within legacy processes, delivering more accurate underwriting results and reducing claims for insurers. Insurtech companies range from the likes of Lemonade in home insurance to Ladder in life insurance and Cape Analytics in property intelligence. Most of these companies seek to improve the understanding of specific risks so insurers can better serve clients and optimize underwriting and portfolio management.

On the face of it, construction tech and insurtech seem like parallel developments, with entrepreneurs applying their tech experience and approach to solve longstanding problems in traditional industries. But now, an overlap between some construction tech startups and insurtech companies has emerged. There is a subset of startups in these categories that are both looking to mitigate risk related to worker injury and property damage on the construction site. When these risks occur, they have a massive impact on project timelines, profitability and worker livelihood.

Think of this new category as Risktech.

Evolution of Risktech

Risktech companies offer technologies that focus on safety and protecting workers, assets and the project as a whole. Since Risktech companies are working to lessen risk across the board, their products or services are valuable to all stakeholders. In the case of construction – where Risktech is growing most rapidly – this means they can sell to both sides of the market: to owners, operators, and contractors on one side, as well as to insurers on the other.

The three biggest risks in construction are well known: fire, water and worker safety. Of these three, fire is most frequent with more than 8,400 construction site fires per year and arson being the single largest cause of fire in non-residential commercial buildings. Water damage is the second most frequent cause of loss, often due to burst or frozen pipes, or water left on and flooding a site. Finally, 21 percent of all workplace fatalities occur in construction, with the total number of fatalities per year increasing steadily since 2011.

Risktech companies have arisen to address these three big risks. Margins are razor thin, and any loss of productivity or worker injury can delay timelines, balloon cost, impact profitability and lead to fines in the case of workplace safety issues.

Until now, construction has been primarily focused on the transfer of risk. However, both parties (construction and insurance) would prefer overall less risk to transfer. This means reducing the frequency of losses an the severity of losses. Any losses impact the timeline and profitability of construction projects while other events, such as the death of a worker, are far more serious.

Construction Opportunities

The concept of reducing risk in heavy industry isn’t new. The classic case is Hartford Steam Boiler, which began offering boiler insurance in 1916, but only if companies purchased boilers with a far safer piping configuration and accepted HSB’s maintenance policy. From the 1850s until then, boiler explosions had been a major industrial hazard, killing as many as 1,800 workers. This push toward adopting safer technology and regular maintenance drastically reduced the number of boiler explosions and improved overall safety.

Today’s construction environment is rich with similar opportunities to minimize the frequency and severity of risky events.

As Risktech matures and more construction companies implement these solutions, we anticipate that the impacts will be enormous.

Pillar Technologies offers real-time analysis of site environmental conditions (smoke, humidity, temperature, dust particulates) through a network of specialized sensors that warn construction foremen if there is risk of a fire, water damage or unhealthy amounts of dust. Notion offers IoT devices that can sense water leaks and pipe bursts. Drone companies like Kespry and Airobotics can inspect construction sites from above and potentially stop losses stemming from equipment theft and vandalism. Wearable companies like Kinetic will monitor workers and their biomechanics. Proxxi will tell workers if they’re getting too close to a live electric wire, while Triax monitors worker location and will alert supervisors if there is a fall.

Adoption of these technologies is just starting to take off. According to the 2017 ConTech Report, so far, 38 percent of contractors are using drones, 9 percent are using wearables and 7 percent are using jobsite sensors for site monitoring.

As Risktech matures, we anticipate the impacts will be enormous. Eliminating the four leading causes of construction worker deaths (fall, struck by object, electrocution, caught between equipment) would save over 600 lives per year and countless career-ending injuries. Reducing the frequency and severity of accidents on construction sites would help more projects stay on time, on budget and with higher profitability. Reducing losses by a few percentage points across a $1.2 trillion industry could make a huge impact as well as saving lives.


About Martha Notaras

Notaras is a partner at XL Innovate, an insurtech-focused venture capital fund that has backed companies Lemonade, Cape Analytics and Slice Labs.


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Comments

  • January 10, 2019 at 6:55 pm
    Dan McKenna, JD, RPLU says:

    Great article! There is a company called MFire Suppression that is all about dramatically decreasing the fire risk in the construction industry. One of their products protects lumber from burning and its application is inexpensive. However, as you suggest change is too slow in the construction industry and homes continue to be built with unprotected lumber for the most part. They do have a ten year contract with Avalon Builders but I live up in Sonoma County and see a huge amount of unprotected wood rebuilding after our devestaing fires of Oct, 17 very frustrating. Hopefully you can help shed more light on this significant problem and the now available solution.
    Thanks,
    Dan

  • January 10, 2019 at 8:53 pm
    Charles Ford says:

    The article is I think an error and two primary places one is the idea that the construction industry hasn’t improved its efficiencies over the last 20 years the reason for this is the interference and the garbage that government slaps on the construction industry and trying to achieve or build anything anywhere for any reason it is government that is the problem not in efficiency in the industry the number to era that the author talks about is the difference between risk and Hazard she doesn’t seem to have a grasp of the difference between the two

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