2 June 2025
Modern Methods of Construction: Innovation Meets Insurance Caution
Modern Methods of Construction (MMC) are reshaping how buildings are designed and delivered, introducing faster, more sustainable, and more efficient alternatives to traditional brick-and-block techniques. From fully modular units assembled off-site to cross-laminated timber panels and prefabricated pods, these techniques are increasingly used in residential, commercial, and public sector developments.
The significance of MMC lies in its ability to address key challenges in the construction industry, such as the shortage of skilled labour, the need for faster construction times, escalating project costs and reducing environmental impact.
Some of the most common MMC techniques include:
- 3D Volumetric Construction (or modular construction): Pre-built units or modules are created in a factory or warehouse and then transported to the site for assembly.
- Precast Panels: Floor, roof and wall units are made offsite and transported to the site for assembly, which is ideal for projects with repetitive structures, such as new homes.
- Precast Foundations: Concrete walls or floors are produced off-site using reusable moulds, particularly useful in onsite adverse weather conditions.
- Twin Wall Technology: Two pre-made walls are joined, reinforced, and filled with concrete, often used to connect concrete walls and floors.
- Thin Joint Blockwork: (or thin joint masonry): A thinner mortar layer (3mm compared to the usual 10mm) is used, enabling faster and more efficient work, especially in off-site conditions where mortar cures in just two hours.
- Cross-Laminated Timber (CLT): An engineered wood product made by layering timber in perpendicular directions to create strong, lightweight panels. A sustainable product used for residential and commercial buildings.
- Light Gauge Steel Framing: The usage of cold-formed steel sections to create structural frames for buildings.
- Pod Construction: The off-site production of complete units, such as bathrooms or kitchens, which are ready-made for installation. Commonly used in hotels, student accommodations, and residential projects.
- Insulating Concrete Formwork (ICF): This is a system that uses hollow blocks or panels made of insulating material that are assembled on-site and filled with concrete to create a strong, energy-efficient structure.
Faster, More Efficient, and Higher Quality Construction
MMC offers significant time savings, with construction time potentially reduced by as much as 50%. Units created in a controlled off-site environment using the same materials ensure speed, consistency, and high-quality construction, reducing the likelihood of defects. This approach is particularly valuable for time-sensitive projects, such as schools that must be completed on schedule for the start of a term.
Cost Savings and Minimising Disruption
MMC reduces the time needed onsite, which in turn lowers the number of materials to be managed and the workforce required. This leads to cost reductions. With fewer needs for onsite facilities, parking, and materials storage, costs are further minimised. These methods are also less affected by adverse weather conditions, reducing delays and ensuring more predictable project timelines. Additionally, reduced construction traffic causes less disruption to residents, which is particularly beneficial in communities near hospitals, schools, or high-density residential areas.
Enhanced Safety and Reduced Risk
MMC techniques increase efficiency and productivity while reducing risk. Processes are pre-planned and formulaic, improving safety by limiting the need for construction workers to work at height, reducing the chance of falls and injuries. Additionally, the risk of accidents is minimised by reducing onsite activities like the use of construction vehicles and enabling robots or mechanical assistance to handle repetitive tasks.
Design Flexibility and Scalability
MMC often uses renewable materials, such as timber, providing designers with greater options in layouts and aesthetics as well as allowing for flexibility for future expansion or reconfiguration. Precast panels, for example, allow more options for producing windows, doors, and finishes. Technology-driven design, particularly through Building Information Modelling (BIM) and tools like Revit, has revolutionised the quality, flexibility, and innovation of MMC projects.
Sustainability
MMC techniques are inherently more sustainable, reducing waste and minimising transportation costs. Often incorporating advanced insulation and energy-efficient designs, buildings ultimately require less energy for heating and cooling. This results in a reduced environmental impact during construction and throughout the building's lifecycle.
Challenges with MMC
Despite its many advantages, there are challenges to implementing MMC. In the UK, the Built Environment Committee report on the future of MMC, published in 2023, highlighted barriers such as risk aversion from warranty providers, insurance companies, and unclear building regulations.
Lord Moylan, the committee chair, recognised that MMC had ‘shown some promise’; however, he noted that the Government has yet to set clear objectives for the funding provided to the MMC sector, leaving ambiguity around success metrics and timelines. Another issue is that many MMC materials and systems are imported, which may detract from the UK manufacturing sector and hinder the Government’s Levelling Up’ agenda. Additionally, factory-based construction can limit local employment and apprenticeship opportunities, reducing the social value of these projects.
MMC techniques are inherently more sustainable, reducing waste and minimising transportation costs. Often incorporating advanced insulation and energy-efficient designs, buildings ultimately require less energy for heating and cooling. This results in a reduced environmental impact during construction and throughout the building's lifecycle.
What Does the Future Hold for MMC?
The Construction Playbook highlights MMC's potential role in healthcare, blue light sectors, and other public sector projects.
LThe UK Government supports MMC as a vital construction method, particularly in public sector projects. However, its future success will require clearer strategies and objectives. It has shown promise in education, with schools such as Colne Community School in Colchester, Clacton County High School, and Sweyne Park School all adopting a net-zero MMC approach to reduce their environmental impact.
The Construction Playbook, developed by the Government and the Construction Leadership Council, emphasises the need for standardisation across projects and sectors. This highlights MMC's potential role in healthcare, blue light sectors, and other public sector projects.
Additionally, MMC could help alleviate the construction industry’s skills shortage by reducing the need for many onsite tradesmen and improving the environmental performance of buildings throughout their lifecycle. As sustainability and net-zero targets become increasingly important, MMC is likely to play a crucial role in meeting these objectives; however, clearly, challenges exist. Without a comprehensive plan supported by both the Government and industry, it will be challenging for MMC to contribute meaningfully to housing targets and other construction industry goals.
The Insurance Challenge
The construction insurance market has been slow to fully embrace Modern Methods of Construction (MMC), largely due to concerns around risk and the uncertainties that accompany emerging technologies and alternative building techniques. Key factors contributing to this caution include:
1. Perceived Risk of Unproven Technologies
MMC often involves innovative construction methods, new materials, and modular or off-site construction techniques. Insurers may view these methods as riskier because they have less historical data to assess their long-term performance, durability, and resistance to certain risks (such as weather, wear and tear, or accidents). The lack of a well-established track record makes it more challenging for insurers to accurately price and cover these risks.
2. Concerns Over Construction Quality
The quality control of off-site or modular construction can sometimes be more difficult to monitor, especially if different parts are fabricated in different locations and then assembled on-site. Any perceived variability in quality can lead to concerns about defects, performance, or structural integrity. Insurers may be hesitant to cover projects that are seen as having more potential for issues like defective construction, particularly where there is a possibility of repeat defects across the project.
3. Uncertainty Around Regulatory Compliance
As MMC techniques evolve, they often fall under new or less-defined regulatory frameworks. The construction industry is heavily regulated, and any ambiguity regarding whether MMC projects comply with existing safety, building codes, or insurance requirements can lead insurers to be cautious. If insurers feel that the regulatory environment is unclear or insufficiently established for MMC, they may be reluctant to provide coverage.
4. Difficulty in Estimating Costs and Risks
Insurers typically use historical data to assess risks and determine premiums. With MMC, there is often a lack of comprehensive data on costs, performance, and long-term risk factors. This lack of data makes it harder for insurers to model potential claims accurately, which can lead to uncertainty and reluctance to offer favourable terms for projects using MMC.
5. Increased Complexity of Claims
MMC can introduce new variables to the construction process, such as assembly or transportation of modular components. This can complicate the claims process, particularly in instances of damage during off-site fabrication, transportation, or assembly. Insurers may be concerned that these added complexities will make claims harder to handle and settle, thus creating additional operational challenges.
6. Potential for Changing Building Standards
As MMC becomes more widespread, building standards and insurance policies may need to be updated to account for new construction methods. Until these standards are better defined and accepted, insurers might be hesitant to provide coverage for MMC projects, especially if they believe that future regulatory changes could render certain methods or materials non-compliant or of greater risk.
7. Initial Hesitancy in the Industry
The construction industry is traditionally conservative and slow to adopt new methods due to concerns about cost, time, and quality. Insurance companies, reflecting the cautious nature of the industry, may initially resist embracing MMC as it requires them to adapt their models, policies, and risk assessments to accommodate new construction paradigms.
8. Potential for Higher Claims in Early Stages
Early adopters of MMC might experience higher insurance claims if unforeseen issues arise with these novel methods or if the techniques do not yet perform as expected. This could make insurers wary of widespread adoption and cautious about offering coverage at affordable rates.
As MMC becomes more widely accepted, these concerns may gradually lessen, especially as more data on its performance becomes available and as industry standards for insurance and construction quality evolve. However, in the short term, the insurance industry's reluctance stems primarily from risk aversion and the need for greater certainty in evaluating the risks associated with these new construction methods.
Underwriting Considerations
Insurers evaluating MMC projects typically seek detailed information to understand and mitigate potential exposures. This includes:
1. The experience level of the main contractor in successfully delivering MMC projects, including whether they are BOPAS (Build Offsite Property Assurance Scheme) accredited.
2. A summary of the module lifecycle, i.e. factory, quality assurance, delivery to site and installation.
3. Details on storage prior to use and installation, including the location, security measures and weather protection both at the facility and project site.
4. Fire risk management, including factory standards, testing regimes, and on-site prevention.
5. Alternative sites for module production if the original facility is unable to function or lead times become unfeasible.
6. Diagrams detailing how modules and the superstructure connect.
7. Details on the risk allocation between the main contractor and manufacturer/supplier.
How Gallagher Can Help
At Gallagher, we understand that innovation doesn’t come without complexity. Our role is to help clients confidently navigate the insurance landscape as they adopt MMC, aligning risk transfer strategies with insurer expectations.
We work closely with clients and insurers to:
- Secure appropriate cover, including Construction All Risks, Professional Indemnity, Product Liability, and Latent Defects Insurance.
- Prepare tailored risk submissions that demonstrate robust quality control, fire safety, and lifecycle planning.
- Facilitate early engagement with underwriters to reduce uncertainty and avoid surprises at the point of placement.
- Advocate for our clients in negotiations, ensuring that innovative approaches aren’t penalised by outdated assumptions.
Looking Ahead
MMC is not without challenges, but its potential to improve the speed, sustainability, and safety of UK construction is undeniable. With clearer regulatory frameworks, growing performance data, and insurer engagement, we believe the insurance market will evolve to better support the sector.
At Gallagher Specialty, we continue to work across the construction ecosystem to support this transition, combining technical insight, market access, and strategic advice to help our clients innovate with confidence.
Let's talk
The Walbrook Building
25 Walbrook
London, EC4N 8AW
Arthur J. Gallagher (UK) Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: The Walbrook Building, 25 Walbrook, London EC4N 8AW. Registered in England and Wales. Company Number: 119013.