Preparation of guidelines to have sophisticated contractor's all risk [car] insurance policies

Abstract

Risk is the measure of likelihood of specific unwanted event and its negative consequences that gear to drawbacks of the project. When analyzing the risk, the probability of occurrence and its impacts are reviewed. Commonly used risk responsive measures are the Facing, Taking, Mitigating, Avoiding, Transferring and Sharing. Construction industry is a sector wherein very poor attitude focused on risk management. The negative impacts of poor management of risks significantly affect time and cost overruns as well as the quality aspects also. Construction risk and construction insurance run together as the possession of Contractor's All Risk (CAR) Insurance Policy has become a mandatory requirement according to the ICTADand FIDIC CoC. The insurance companies admit huge risks to a lower premium and in the mean time Contractors try to bring down the insurance premium as much as possible to increase their profit margin. Hence CAR insurance policies are embedded with many of the strict conditions that relieve the insurers from their liabilities in many instances and the issued CAR insurance policies are not project specific. Neither Employers nor Contractors thoroughly go through such ambiguous terms stipulated in the CAR insurance policies, before an official agreement is made with insurance companies. The objective of this research is to establish the guidelines to have a sophisticated CAR insurance policy in Employer, Contractor and Project aspects in road projects based on the merits and demerits of the prevailing CAR insurance policies as well as the views of professionals, their knowledge and suggestions gathered through a questionnaire survey. Twenty two nos. of CAR insurance policies of different major road projects located In different zones [representative sample] in Sri Lanka, were collected and analyzed. And one Hundred and Eighty Nine numbers of Questionnaires were also analyzed. Based on the aforementioned analysis, guidelines were prepared and all achievements are depicted under the Clauses 5.2.1 and 5.2.2. Key Words: CAR, Contractor, Employer, Insured, Insurer, Loss or Damage, Risk