108. Builder's Insurance Insights With Petara Tanuvasa

Is that common if there's a large claim from a builder that the insurers won't renew and then it's very hard to find a new insurer?

Absolutely.

Is it?

It's very common.

That's very worrying.

It is. It is. It is. It does happen and has happened. And the insurers have that. That right to not renew if they feel the risk is not within their appetite or if the builder is not doing what they need to do to mitigate their own risk.

Welcome to Professional Builders Secrets, the podcast for building company owners wanting to grow safely and securely. I'm your host, Will Blunt, and today I'm joined by Patara Tanuvasa from Silverback Insurance, an insurance broker with extensive construction industry experience. Welcome to the show, Patara.

Thanks, Will. Thanks for having me. It's a pleasure to be part of the podcast. Thank you.

Oh, absolute pleasure having you on. There's going to be a ton of great advice for the builders out there today about insurance, which is a bit of a dry topic typically, but you're going to bring a nice twang to it, which is going to be interesting, I'm sure.

Absolutely. We'll give it our best.

Go you will. You do a great job. You'll do a great job. We were just chatting before the show about your last name, and I was trying to ask to make sure that I pronounced it correctly. I'm not sure if I did, but you told me a backstory about the origin of your last name, and I'm just interested to share that with the listeners.

Sure. So I am Samoan by descent, born and raised in New Zealand, and I'm now an Australian by choice, given that I'm married to an Australian and kids that have been born here. But the origins of my name, Tanuvasa, it means to bury the ocean for all of those people out there that have seen Moana, where there are massive canoes in. In the Pacific. So my forefathers were navigators in the Pacific, and it was when a chief was standing in front of a canoe and just seeing the canoe as they were traveling through the waters, just cutting into the ocean. And it was then he coined the phrase that he is burying the ocean as he's traveling along. And that's when the name Tanvasa was formed.

Interesting. How has your cultural upbringing played into the way you do business?

Yes, it's an interesting question that. Because I learned very early in my business journey that I can't be anybody other than myself. So I started to look within as to what my core values are and define that as I went out to the market and start dealing with business owners to start to grow and scale my business. And it was then when I started to really invoke my cultural background and some of the concepts that we live by as Samoans is what they call awa malistai. In the Pacific, they drink this in a ceremonial way. In Fiji, it's called kava, but in Samoa it's called Ava. But essentially, the meaning of this name, if you put it into an English translation, it means love, duty and respect. And I started to implement this in the way that I deal with my customers, to be very empathetic in their. In their position as business owners, to treat them with respect and integrity and be very transparent in the way that I do business. And you know what, will, it has worked very well for me. I've gained the trust of many of my business clients in the way that we do business together.

Yes, I like that. It needs to be authentic. Right. But when it comes from that internal.

Place, it is absolutely, absolutely just being genuine, being truthful, being transparent, it creates a very strong relationship with customers because I feel at the moment, with so much information that's out there, truth has a lot of value now in the market space. So when you find people that operate out of integrity and of truth, it holds a lot of value in the way that you do business.

So that's the way you do business. But tell me more about Silverback Insurance and how it all started and how you ended up working with builders.

Sure. Very interesting story. So whilst working for one of Australia's most esteemed builders and perhaps the most intelligent person I had ever had the opportunity to work for. You know, it's from that experience that I gained a lot of respect for builders when I saw what he had to do to sacrifice very sacrificial way of doing business. You know, put putting everything on the family, everything, just to see the business grow and flourish. Amidst the pandemic Crisis Back in 2020, I came to the realization that there was a significant gap in the insurance market that needed an insurance broker with real construction industry experience that I now have at that time. But I must mention, though, that before coming into the construction space, before that I was an insurance broker, but working for someone else. But in that whole journey of being in the insurance world, I was intrigued to understand building and construction not just from a professional and industry perspective, but from a personal point of view as well. So the opportunity to work for a builder represented a turning point in my life to discover, to learn and understand how insurance actually plays an important role in a successful construction company. And it was at that time where I discovered how to use Procore as a construction software. And I came to realize that there are risk management solutions within construction itself that builders are using which can be leveraged to improve insurance risk ratings and risk assessments so that the premiums are accurate. So driven by that desire to better, to do better for myself, basically for myself and for the future of my family, I set out to establish Silverback Insurance as a construction risk specialist broker and in my role as a contract administrator. At the time, back in 2020, I saw just so many subcontractors Bill and these guys were coming looking for jobs, knocking on the door for the builder's door to give them contracts. And being a contract administrator, I started to really know them intimately in the way that we interacted. And a lot of them just didn't have a lot of formal education. It was just a whole lot of experience. And I started question myself said, you know, looking into myself and thinking, man, I have been to university, I have gotten degrees, gone through all the formal trainings and I now have the experience through time of working in both insurance and construction. And I was like, man, if they those guys can do it, I have that potential to step out, start my own business and pursue a better future for myself and my family. So I was born out of that desire amidst the whole pandemic and a hard market that I set out to start an insurance brokerage to address the need that was in the market for a specialist in construction, a broker that understands and gets the builders and to create a business opportunity out of that.

Interesting. Insurance is such an important part of any business, but especially in construction with a large amount of risk involved around every project. What are the key types of insurance that residential construction companies need to think about?

Sure. So there is a plethora of insurance out there. But I do focus on some core policy covers that I put together in a program that basically addresses the majority of the risk that builders encounter or are faced with in their line of work. And that is your contract works and liability. It covers for any material damage on the works that are under construction. Third party liabilities for any worker to worker claims or damage to adjoining neighbors, members of the public, their properties or personal injury to third parties. Your professional indemnity that covers errors and omissions on design and on the advice management liability for statutory breaches such as the OH and S and cyber for cyber security. Because we're constantly back and forth with clients and so many different stakeholders in the way that we do business. There's a lot of risk exposures there anytime that we're using the Internet. So that forms the basis of my recommendations to builders. But I do want to touch on, despite having all the insurances, there's no insurance out there that covers all risk. It basically comes down to a contract. It's an agreement between the insurer and the person that's being insured that under certain terms and conditions, for unseen events, that the insurer will carry that risk. So it's a risk transfer arrangement in a form of a contract. And so it's, it's so crucial for builders to, to take the time, you know, take the time, have a good broker as part of their team that understands their business model and be able to work with them in their risk management program to understand what coverage that they need and they require specifically for them and the number of projects they are doing across the course of those, those many months and years, and then be able to have the right insurance tailored specifically for that, for that builder.

How many of those insurance types you just spoke about are mandatory in the construction industry?

So there are just two covers that basically is required for builders and that's their workers compensation and a liability cover. But the legislations are quite vague in their requirements for builders to hold other covers. But it does refer in most of the contracts that a builder should take out the right insurances to cover the risk exposures that I've touched on just before. So it's important to have a thorough consultation. Take the time to sit down with your broker and go over your insurance program, ask those hard questions. If there's something that they're not so clear about, take the time to go through so then you are clear with that understanding, you can then adapt the way that you manage your risk on site during construction. You can set up your policies, your company policies, your procedures, your documentations to make sure that those risk exposures are covered in the way that you manage and complete your projects.

It sounds like, I mean, insurance is the solution, but it sounds like what you're really talking to builders about is a risk assessment, analyzing their business to understand where the risks are and then trying to cover that as best you can. Is that a fair way to put it?

It's a fair statement. And yes, that's what I look to do in my customer base, in my portfolio. And the builders that we do business, it's really looking into their business and Identify vulnerabilities and their contract administration really well. Just using, using the knowledge that I've taken from construction because that has equipped me and given me the eyes, fresh new eyes and how I look at risk in a way that resonates with the builders. So when we talk, when we have conversations over their risk management, they understand the way that I articulate what they need to do to comply with the insurance requirements. And that is working really, really well. But yeah, there's, there's still a lot to do in this space because I feel like there is a lot of builders out there that are still not so clear about their requirements on insurance. And then when a claim happens, that's when you know, for some builders, it's their last stop before they go bankrupt. And it only just takes one claim will a significant claim to take people under.

That's the scary part, right?

That's right. That's right. So we want to avoid all of those risks and make sure that our builder clients are trading well and successfully and be able to grow and scale their business successfully.

Hopefully. Hopefully it all comes back to risk management. As you mentioned. Can you talk more about how builders can manage will assess the risk and manage the risk during their projects?

Sure. So I always encourage builders to look at all the many options that are out there for construction services. Software solutions. You've got to have a solid construction software Solution. Whether you're 1mil builder or 10mil builder or 20mil, it does not matter because you're still exposed to risk. And when claims occur, the insurers need facts. They need information of who was there, what had happened, the circumstances surrounding the incident, so they can assess the claim properly and identify how to address the losses that become of that claim. Some of these losses are quite significant and the lawyers get involved and as we all know, facts is what's needed to go through that process. And builders do have the responsibility in managing the data and information that they inherit from all these projects. And there is a time frame in which they need to keep that amount of information. It is a responsibility. And so if they don't take that seriously, they wear the liability should something significant happen where that information is required. So construction software is an absolute must for builders to have. It makes it very easy for them to store information and the opportunity at a later stage, which could be two, three, four or five years later down the track. If they need to retrieve information to confirm the dates and the time, it's very easy to extract that information to then settle claims.

Is it just Just inputting information about the incidents that happen on site or are there other things that other information in construction software that is going to make it better down the road if you have claims come up?

Well, I think it's just a best business practice and taking those responsibilities quite seriously. Like I said, there are just a ton of options out there, but it's builders not. Not doing their due diligence and just relying on, you know, on Google boxes and spreadsheets to keep their information, which, as we all know, can get lost with, with, you know, if you're changing systems in your computer. Yeah, you lose all of that information or at risk of losing all of that information. There's no way of retrieving that when you need it. So it's understanding your obligations as a registered builder. I mean, that's why you are registered builders, because you are deemed to be the expert in that field and understand the regulations, the legislation, requirements, requirements surrounding that particular role. It's a huge responsibility. And I feel that the builders that take that quite seriously are the ones that become successful and are able to grow and scale their business. You know, information is very key to being successful in this business because you are dealing with contracts and you are dealing with a whole lot of risk that comes with it if there are contractual breaches. So there's got to be a way of recording of all of that information and be able to substantiate, you know, incidents through your site diaries or some sort of record or some sort of system in place to record and retrieve information when needed.

Is there a construction software of choice that you've got in mind or you don't? No particular one.

Well, look, I deal a lot with procore. I feel like that is, you know, for builders that are doing really well and on an emerging market, they need a big system such as Procore to manage all of their information. Has a lot of integration solutions that can sort of marry into utilizing that core data. But there are several other options out there. The builder just has to have a proper look and find out a solution that is better suited to. To their business. But it's taking that time, you know, to go through that process and having those measures in place, because in the long run, it's going to be very effective in managing and reducing risk in their business.

Yeah, absolutely, yeah. And there's, there's, as you said, there's so many different softwares out there. It's worth doing the due diligence and finding the right fit for your business.

100%. Yes.

So what mistakes do you see builders making when they're applying for insurance?

Again, I've touched on it previously, but I'll elaborate on that. It's just not taking the time. So allowing renewals to just go through without reigning things back, sitting down, booking an appointment with your broker and go through things quite thoroughly so then the right information is transferred onto the broker to then take onto the insurers and making sure that your risk is covered adequately. It's when you're just letting things go and having that attitude of she'll be right, mate, you know, here's, here you go, here's a few numbers to work with, get me a quote or get me my renewals. You know, you've got all the information in your system or you should understand the type of projects when they're due to complete. You know the limits that needs to be covered in terms of project values, you know, the kind of contracts that you're managing. All of that information is on hand and you should be able to discuss with someone that understands and gets your business. And once you have that accurate information, you must always save money because if you're just giving a guesstimate, you may be paying a higher premium than you should have if your actual numbers are different from those numbers that you've submitted in your declaration on renewals or on you business. And again, that's just taking time to just pull back, sit down, review, discuss with your broker, get the right advice, any things that you're not clear about, then you know, it's a really good time to bring it up. So that information gets to the insurers in a declaration before a claim arises. So it comes down to having a good relationship with, with a broker, you know, having them as part of your risk management team that you can just pick up the phone and ring them and discuss something that's not clear in your mind and be able to have those discussions and have that trust factor in place to work together, because that's how it is in understanding the policy. But then can you imagine if a claim happens, you're going to need that relationship. You're going to need to have that broker there in the tough times, in the time of need, and be able to fully rely that he's going to get the best result for you when it matters.

Do the insurers just take the builder's word for the information they request or they. Do they ever do audit on the construction software and the incident reports and all that stuff as well?

Well, well, that is currently something that I've made a mission to do, to be that bridge between the two industries. The insurance, insurance, they, they operate out of good faith and goodwill and are very trusting. So when they give a declaration to a builder or an applicant, they trust that information when it's submitted and then based out of that, they do their risk assessment. Through the time that I had in construction and started to gain experience in Procore and started to give me an insight on those type of solutions, I feel now that that conversation is very relevant to the insurance market. And I have been back and forth and be the mouthpiece to really bring into the attention of the insurers that there are so many solutions within construction that we need to look to and tap into to utilize. So we're not reinventing the wheel in the insurance industry, but rather leverage off information and data and construction software and solutions that are already being used by builders to then equip us in assessment of risk, you know, rating of risk. And then with the settlement of claims, if we can somehow marry all of that together, it'd be so much easier for everybody. Yeah, you know, I think I'll put, put up an example. So a requirement that a lot of insurers have is that a builder has a system in place to collect all the insurances of all their subcontractors and consultants. So it's the liabilities of your subcontractors that are labor based and a professional indemnity for your consultants that are design and advice based, like your engineering, your architects. Now, if a claim happens, you've got to be able to identify whose fault it is, of course, and then be able to provide the insurance of whoever caused the loss to the insurer. So then they can put in force their rights to subrogation for recoveries and compensations. Now, if there is no system and nothing in place to retrieve all of those insurance records, it is the hip contractors, insurances that would then respond and take the full brunt of the claim. And that's when it becomes a problem. Because one policy now takes the full risk of a claim instead of having it distributed across the many stakeholders or the many people that were involved in such a claim. And that's, to be honest, Will, that's the interest of the insurers to be able to distribute the risk, get down to the person who actually caused the loss, and then work their way backwards from there in terms of proportion of the contribution, contribution to that loss. So again, it's important that a, a builder has a process and a system and a construction Software to manage all of that information. We've recently settled a claim and this is a classic example where a builder was at the handover stage of a four level commercial project. And in, in the last few weeks of testing and commissioning the mfb. This was down in Victoria. Their contractor, their authorized contractor on the installation of the sprinklers did not install it correctly. And there was somewhat a defect on the actual sprinkler head on the testing and commissioning. The water pressures went through and it just washed through everything causing a significant amount of material damage. Now there are two options. The builder can trigger their contract works and liability to respond and cover that loss, or they could go after the liability of the subcontractor who actually was the cause of the loss. He had this system implemented. He's been my client now for going on three years and we have worked together to put this in place effectively. And this was a good example of how a, a procedure and company policy in the way that the risk is being managed internally came into fruition in how we covered that loss. So the liability of the subcontractor responded and effectively covered the. It was a significant loss. We're talking about close to $300,000 worth of material damage. So you know, and he didn't have to trigger his policy. It was there if he needed to rebuild to trigger it. But in the end it was the liability of the subcontractor that responded and we were able to be very successful. We've renewed his insurance. The premium, there was no impact on the premium at all. And I was able to tell a really good story to the insurers and the underwriters of what this builder did to mitigate his own risk. And yeah, it was a good result in the end.

Well, yeah, it sounds like a great result. And I imagine as well, if the builder had had to act his policy on that claim, his premiums would then go up as well, 100%.

So not only will his premium skyrocket, if the insurers turn around and decides not to renew his cover, we would find it extremely difficult to go out to the rest of the market to get to source another alternative cover. And builders need this policy for their progress claims and just a trade. It's a mandatory cover to have. So if, yeah, it would have been a very, very challenging.

Is that common if there's a large claim from a builder that the insurers won't renew and then it's very hard to find a new insurer?

Absolutely.

Is it?

It's very common.

That's very worrying.

It is, it is, it is. It does happen and has happened. And the insurers have that, that right to not renew if they feel the risk is not within their appetite or if the builder is not doing what they need to do to mitigate their own risk.

And as you said, it's all about, I mean, having those systems in place, tracking everything, construction software. And it speeds up the process if the insurers start to look at the software and everything like that as well. But it also just levels up the game of the builder. They're running a better business, they're tracking everything and they're making sure that they're at the best possible standards with all their contractors and everything. So it's just a better industry for everyone.

Yeah, absolutely. You know, managing information is very powerful these days, you know, in terms of reducing the risk. If the builder can pick up an error in design before it goes to site and be constructed, he has just saved himself tons of, you know, of money from any financial loss that he may have otherwise occurred, because there's a lot of responsibility from transferring a design that's just purely on paper to building this beautiful project. But in the end there is a significant defect that causes a significant loss. So the tracking of that information gives the opportunity to identify those errors and omissions and be able to provide that solution to then fix that up before it actually gets transferred onto a project site.

You've given some great advice in different parts of the whole process, from managing risk through to the claims process. But if you had to summarise it, what advice would you give to builders looking to streamline the whole process from start to finish?

My greatest advice, Will, is just find the right broker, do the research, have a look at someone who really understands the construction space and understands builders. Engage that person, create a relationship. Because you can't be across everything, you can't know everything, especially because building in itself is a lot of information to get through. So you need someone trusted to be part of your risk management team that you can just rely on. If you need information, go to him for advice or bring him in. Like, for example, Will, I get stuck into my builders risk management procedures. I go through contractual reviews. I'm not a lawyer, but I use my experience from being in construction as a contract administrator to identify certain things, things that they need to pay attention to to then go and get the right legal advice. For example, I need to identify whether the contracts that they've signed have hold harmless clauses or a waiver of Subrogation. These clauses are detrimental to the builder's insurances because it could mean a declinatory declinature, a declined claim, if these clauses are in the contracts and the insurers haven't had the chance to review it to accept that particular risk under a professional indemnity contract policy. So I offer that service as an add on because I know that by doing so it reduces the risk significantly for the builder. And then when something does happen, I have full confidence to then deal with the claim scenarios and be able to get much better results for my clients. So, advice to builders. Get the right broker, form a good relationship, bring them as part of your team, get someone that you can pass on your subcontract agreements or contracts for an insurance review. Not a legal review, an insurance review to point out certain sections that you can then take to your legal advisor for a proper legal review and then adapt those agreements in place before you sign them on. Because very difficult to work your way backwards once you've signed those contracts. And if you're dealing with multi developments with basements and large projects, it can be problematic.

Yeah, that's great advice. And that's just another example of mitigating the risk, assessing and mitigating the risk through the whole build process.

Absolutely, absolutely.

So what I'm hearing you say is most of the work needs to happen before there's a claim. Managing all of your projects through construction software, having your contracts lined up so that it can reduce your premiums, and then also having, if the worst does happen and there is a claim, having a system in place so you've got diversification of liability with your contractors and things like that, but also having all of the information you need so that when there is a claim, it's very easy to go through that process. It makes it easier for everyone else.

Absolutely. And I think what you've just described there is the prudent builder. Every builder that knows what they're doing and has everything under control does exactly that. They're able to navigate through risk, they're able to scale and grow and successfully through turbulent times.

Well, I mean, if I just put myself in the builder's chute if I want to scale and, you know, increase my amount of sales and revenue and more projects. If you do that on unstable ground where you're unsure about how much risk you're taking on, that's a frightening thing. But if you've got all of that, all your ducks lined up from a risk point of view, you can be confident that you can actually increase all the, all the other, other parts of your business?

Absolutely. And at a very high level with the much larger projects, it becomes your differentiation and a point of value for a developer to select you in the tendering process if you're able to demonstrate how you're actually mitigating risk on those large projects and be able to provide evidence based data and information on the construction softwares that you're using because it gives them an insight of how they can be included in that process and it creates that level of confidence that you will be able to manage the project from start to finish to handover and then the management of the warranties thereafter.

Perfect. Well, Patara, thanks so much for coming on the show today. I've learned a huge amount about just mitigating risk and also looking at different insurance options if any. APB members are out there and they want to check out Silverback Insurance. You serve the Australian area, is that right?

That's correct. Awesome.

So you're an APB Rewards partner. So we'll include the link to your page in the notes and members can get a cash rebate there. But is there any final advice you'd like to give the builders out there?

Yeah, just keep, keep on the grind, continue to do the right thing, be diligent, work with integrity and, and things should, should come your way successfully.

Thanks, Petara. I've had a, had a great conversation today and a big thank you as well to our listeners wherever you are in the world. If you like the show, please subscribe to Professional Builders Secrets on your platform of choice and if you're feeling generous, leave us a review. But until next time, have a great day.