By Roberta Maynard. With the worsening of the insurance crisis, builder differentiation has taken on a new, and darker, importance. It's no longer a marketing strategy meant just for selling more homes: It's a way to merit better coverage, or in some cases, any kind of coverage at all. As several factors converge to push rates up and the scope of coverage down, builders will have to make a case as they've never had to before that they are a good risk. That means not only demonstrating competent use of building products and quality work but also a record of reliably consistent jobsite safety.
On an industry-wide front, state builders' associations are talking about coming together to self-insure. The NAHB is working on a detailed plan to alleviate the effects of the crisis, which has forced even bigger builders to cobble together their coverage from a variety of sources. Possible components of the association's still-evolving plan include model legislation, tort reform, and considerably beefed up research efforts.
Also under discussion is how to make the industry more appealing to insurers, including how to attract new carriers. Educating insurers and buyers about what constitutes a well-made home is another worthwhile goal.
But one idea that's been proposed is destined to fail. And that is to try convincing homeowners to come to the discussion table rather than call their lawyer. Disgruntled buyers and attorneys will find each other. The goal should be not to thwart their purpose, but to provide no valid reason to seek legal recourse.
The builders who have an edge -- provided they can convince insurers and the home buying public -- are those who have already invested in building systems research, those who work with their trades, not against them, and those who demand that their company consistently produce solid quality homes. For builders who haven't put quality at the top of their priority list, it's not too late to get tough about how they build their homes, though it won't erase an undesirable loss record.
Photo: Katherine Lambert
At present, such factors as defect litigation and the ending of a long and favorable insurance cycle, have the entire industry suffering. That may change as good builders make a case for themselves. Insurers that continue to do business in the industry will only get more selective, and sooner or later, so will buyers. Remember, the single greatest factor driving customer satisfaction, according to J.D. Power, is quality of workmanship and materials. This category contributed 26 percent to overall satisfaction, more than twice as important as price and value.
Our cover story on branding underscores the power that builders have to tell their story of dedication to quality, to become known for doing something better than their peers.
Building production homes -- which hundreds or thousands of families buy each year -- should be justification for delivering a superior product, not an excuse not to.
Published in BIG BUILDER Magazine, July 2002