Effectiveness of contractor's all risk (car) insurance policies in road construction projects

Abstract

There is a growing body of interests in insurance, supporting interactions between the construction industry and insurance industry. However, it is not always clear why construction insurance exists and how it operates from the perspective of the construction industry. In Sri Lankan the construction insurance focus with the contract documents such as ICTAD SBDs, FDIC and particular specifications. This traditional approach to insurance has been one that requires the contractor should purchase appropriate levels of coverage for all parties to a contract such as employer, consultants, contractor and subcontractor as called out in the contract documents through their own insurance underwriters. While this approach to insurance remains predominant in the construction industry in Sri Lanka, it is recognized for its inherent inefficiencies in terms of cost, administrative management, claims management, gaps and overlaps m coverage. Because of the rapid and ever increasing costs of insurance, construction professionals, owners and construction insurers have required a more effective and efficient insurance programmes aimed at addressing existing shortcomings. The objective of this research was to study how the contract risk can be handled through insurance in the road construction projects to minimize the inefficiencies. Data collected through RDA, PRADA, road construction contractors and insurance underwriters. The results can be used by public agencies when preparing bidding documents and by construction contractors to better understand, which factors affect their insurance premium and to realize that there are significant factors to be considered when obtain insurance covers and preparing claims against damages.