The operational benefits of modular construction have their own risks, too.

Modular construction, in which major components and sometimes entire structures are manufactured offsite and then transported to the jobsite for installation, is growing. The U.S. modular construction market is projected to reach $25.4 billion by 2029 and is outpacing the overall industry by 1.3%. Within this growth, multifamily, office and data centers, and lodging are leading drivers.

It’s no wonder interest is rising: In an era of skilled-labor shortages, rising material prices, volatile climate risks and economic uncertainties, building all or part of project structures in a factory environment can provide increased efficiencies and quality control while reducing time and manpower needs on the jobsite.  

But these operational benefits bring their own set of risks—from structural damage during transport to new types of cyber vulnerabilities—that traditional construction and business insurance programs aren’t always designed to handle. Managing these unique exposures requires owners to evaluate modular-specific risk management strategies proactively.  

Five Risks and Coverage Areas for Modular Construction

While the end result of modular construction is the same—a new, functioning building—the path to get there is not, and neither is the footprint for risk. Manufactured building projects combine most or all of the typical risks of a traditional jobsite with those of a factory, plus the space that connects the two. 

Offsite work should not be an afterthought. To avoid coverage gaps, work with your broker to expand your insurance policies to ensure comprehensive coverage for modular construction. Areas to address include:

• Inland marine and transit exposures: Manufactured construction requires rigorous quality control—but it also exposes building modules to hazards as they move from the factory floor to the jobsite. Damaged components can derail project timelines. Insurance coverage must be seamless from the factory floor to final installation to cover potential losses or transit delays.
• Builders risk phasing: Most of modular construction is out of sight, but it can’t be out of mind. Insurance coverage should reflect the entirety of modular timelines, with coverage spanning off-site fabrication, storage and on-site assembly.
• Cyber security: Design and fabrication technology, including building information modeling platforms and IoT-enabled systems, creates additional cyber vulnerabilities, including IP and data protection risks. Consider your existing cyber insurance coverage limits to ensure they cover the additional tools and exposures.
• Wrap Ups/General Liability risks: Many projects, particularly larger and more complex projects, leverage the Wrap Up liability model to reduce insurance costs and improve coverage quality and continuity. Traditional Wrap Up programs however, typically provide coverage only within the defined borders of the project site. That may lead to coverage gaps for construction activities and work completed offsite, requiring your broker to appropriately modify the coverage terms of the Wrap Up policy.
• Workforce risks: Just as on the jobsite, modular factory workers face a range of health and safety risks, including strain from lifting materials, injuries from tools, and slips and falls. But the ergonomic stressors and equipment-related injuries on the manufacturing floor do differ in some areas from those of construction sites, and regulatory requirements are not uniform across these environments. By anticipating these differences and ensuring the offsite and field-based construction safety strategies are fully coordinated, companies can help lower injury rates and support compliance. In addition to adjusting how they implement and monitor safety, leaders also will need to work with their broker to alter or enhance coverage to accommodate the additional and varied risk.

Collaborate to Enhance Protection

Modular building presents a number of meaningful opportunities for construction firms to increase efficiencies, elevate quality, better manage cost and schedule, and bolster resilience. To be fully successful, firms must pair that operational innovation with thoughtful risk management, using strategies that cover the expanded risks arising from modular construction across planning, design, fabrication, delivery and installation. 

Whether you’re already active with manufactured projects or are just getting started, connect with your insurance broker early and often to update or enhance your policies to meet the unique needs and associated risks.

SEE ALSO: MODULAR CONSTRUCTION’S BIG BOOM: NEW RISKS OUTPACING STANDARD CONTRACTS IN INDUSTRIAL PROJECTS