Procore on March 21 announced a new embedded service offering, Procore Risk Advisors, letting Procore act as a digitally-enabled construction brokerage to help its customers secure advantageous rates and terms on A+ rated insurance programs reinsured by Swiss Re.
Financial Services Inside Construction Software
While in-house underwriting is new, the formation of Procore Risk Advisors is not Procore’s first move to leverage its data set to help its customers secure financial services. And while Procore may be more progressive than the field in setting up an internal underwriting team, other companies are also adding financial service offerings of various types to construction software, monetizing and extending the value of the deep data insights they have on each construction customer.
Procore in 2021 acquired Levelset to handle lien management, and that product had already included a multi-vendor marketplace for attorneys to help contractors speed up payment. Procore also helps contractors with materials purchases with financing through in-house material finance product which gives contractors 120 day payment terms for their materials.
Flashtract meanwhile included a marketplace of lenders who can provide gap funding to protect cash flow, based on a customer’s application for payment data. Constrafor is building its multi-tenant software-as-a-service (SaaS) application for subcontractor procurement, administration, including contracts, certificates of insurance (CoI), invoices, payments and diversity procurements around its early pay program (EPP), which provides gap financing based on the intimate details they possess regarding their customers’ projects and operations. Constrafor self-funds its loans, relying on capital from a $100 million seed round. Other construction technology vendors IRONPROS covers have said they are seeking venture funding to add in-app purchase capabilities to their products.
Procore has dealt with insurance through partnerships, including one with Shepherd, but will now be acting as an insurance broker themselves. Procore Risk Advisors combines:
- Exclusive access to in-house underwriting programs with rapid quote times backed by A+ rated carriers
- Improved terms made possible by using data from within Procore to document business practices that lower risk
- Procore’s construction expertise in mitigating risk with technology
Making Contractors’ Lives Better
In a call with IRONPROS the day of the announcement, Procore President of Fintech Paul Lyandres and Procore Risk Advisors Vice President Danny Seigle said the motivation behind the entry into insurance underwriters was to address Procore’s core goal—to make life better for contractors. And the insurance offers now available stem directly from the core of the software—which focuses on project management.
“For a lot of years, we have had customers joke with us that project management really just masquerades as risk management because a lot of what these folks do is manage the risk of this project,” Lyandres said. “As we have gone through this multi-decade journey of understanding the industry, what has always resonated with us is that there are consistent struggles, like getting paid on a timely basis. And then there is the cost and cumbersomeness of the insurance process in general. And we knew we would never improve the lives of everyone in construction unless we tackled these challenges. It took us 20 years to get the breadth of data, and the breadth of partnerships in place so we could solve this problem statement.”
If You Lead a Good, Clean Life, Get a Deal
Procore will only be looking at individual customer data when given permission, Lyandres and Seigle said. But the company will use customer data from Procore customers similar in size, service offering and project type in the aggregate as a baseline to determine how well a potential insured runs their business.
“Our product suite extends to everything around project management, quality and safety, financial management, workforce management, so we are able to capture a plethora of information that goes into the construction project,” Lyandres said. “We have all the data points to define whether the project is being successful and whether it is managed in a really thoughtful way. And we can look at this from an individual standpoint and in the aggregate, so we can understand how does their ability to leverage technology compare to the broader peer set.”
Procore Risk Advisors can then show insurance companies that the customer uses daily logs, documents its safety practices and makes excellent and thoughtful use of the software.
“It will take many years to continue to prove out these different correlations, but we believe the insurance industry sees what we see, which is running a better job site, running a more consistent and thoughtful process, leads to better outcomes,” Lyandres said.
The insurance practice will go to market directly through several channels, including through teh Procore customer success contacts, according to Seigle. He stressed that a number of the measures used to drive underwriting were created by the customer managers, and they will be in a good position to help customers understand how well they were using the software.
“Our customer success managers are already having conversations with them on their pain points, and how the platform can solve those problems for them through operational efficiency,” Seigle said. “How can we make you more productive? How can we make sure these RFIs are tracked properly? Are they closed out on time? Those open questions, if they don’t get answered on time, can become a schedule impact. Having these processes well tracked, assigned to the right people and closed out is a good sign of a proper operation and that leads to better outcomes. There is such a breadth of data in the Procore platform that we can bring to the underwriting equation that we can use to enhance those models and reward our customers for the investments they have made in running better businesses.”
How much of a reward can contractors realize? That depends on the specific use case, the type of coverage and how broad the Procore tool set the customer may be running. Seigle cited a case where the insurance advisory approach was able to remove barriers to growth for one contractor.
“In this case, their surety program was a limiting factor for their current growth and ambitions,” Seigle said. “We showed them in Procore how they were one of the best users of our financials, and their budget management and change order management, invoice management, use of e-signatures to get contracts signed quickly and reduce risk—all of that makes you a lower risk in the surety market, and acts as a credit in underwriting risk. We were able to leverage that data along with the various surety underwriting submissions and get them a much better surety program with a 20% increase in aggregate capacity and lower limits on personal indemnification.”
Individual or Project-Wide
Procore Risk Advisors can, according to Lyandres and Seigle, help contractors that issue blanket indemnity to their subcontractors for a project. In general though, the plan is not at this time to encourage generals to drive to Procore Risk Advisors subcontractors whose insurance policies or indemnifications may be turn up in a certificate of insurance review as problematic for a given project.
“For large contractors, we can do wrap ups so they can take up liability for their subcontractors,” Seigle said. “In the middle market, this is less common. Usually, generals have had to rely on subs securing their own insurance.”
Secure and Protected
Seigle and Lyandres provided assurances that Procure does not view individual contractor customer data without permission, so Procore customers will not be blindly pitched insurance based on their use of the platform. For those still leery of use of data to support insurance underwriting, Procore has protections in place to keep customer data private.
As a major cloud business software provider, Procore complies with SOC 1 (Type 2) for internal control over financial reporting, Soc 2 (Type 2) which covers how Procore keeps data confidential and secure and ISO 27001:2013 which is a framework for confidentiality, integrity and availability of data.
BOTTOM LINE: Procore is almost ubiquitous in the construction space, but with entrepreneurial and established companies knocking on contractor doors with a variety of solutions that could notch out part of Procore's offering or replace it entirely, adding value-added services is just smart. Even as competitors build out their own cloud-based software to become almost as robust as what Procore has created over two decades of organic development and acquisition, enterprise plays like Procore Risk Advisors will be harder to duplicate and can drive real value for customers.
