Owner Controlled Insurance Programs versus Traditional Insurance Programs

It is purchased by construction owner for the benefit of builders or contractors engaged with the project, which includes compensation of workers, general liability, pollution liability, builders risk and professional liability among others. OCIP is a comparatively new vehicle in insurance sector for residential projects. Due to rapid growth of defective constructive designs, these policies are becoming highly popular among the builders and the contractors (Grenier, 2001).
The study is mainly based on the analysis of OCIP versus Traditional insurance programs. Both the insurance policies play vital roles in the construction sector but OCIP provides advanced reliability than traditional insurance policies, as OCIP wraps up multiple policies provided by the owner to the contractors or the developers in a project including the facilities which are not supported in traditional insurance policies.
Risks Associated with OCIP
OCIP is commonly known as Wrap-Up Policy in United States. Both the OCIP and traditional policies were developed in 1950’s. The difference between the owner controlled insurance program and traditional insurance program lies with those who procure the policy. In OCIP, an individual party purchases insurance policies for all contractors involved in the project but in case of traditional insurance program, it is not applicable (Olson, 2006)….
Although OCIP provides numerous benefits, there are various risks associated with it both for owners as well as contractors which are stated below: Risk of Owners The risk can be identified through various factors including administrative burden which signifies that if OCIP is not managed accurately, it can provide huge administrative load on the contractors. Subsequently, the liability of the construction owners is also likely to increase. OCIPs are useful mainly in large projects, small construction owners are deprived from the facilities of this policy. The small contractors of United States have been witnessed at times to prefer acquiring higher limits of insurances than that provided by owners which can place a negative impact on the contractors (Gibson, 2006). There is always a market risk associated with every program. The market risk signifies that if the market of insurance hardens, there is a possibility of financial risk which can result in increase of premium cost. Bid Preparation aspect signifies that there are certain additional costs involved in it, such as retention of a risk consultant, a complete study of advantages and disadvantages of OCIP, submission of proposals and detail interviews (Taylor, 2011). Risk of Contractors The risk of the contractors can also be observed by certain significant factors. For example, limited insurance coverage is one of the vital aspects which focuses on the limitations in the insurance policies provided through OCIP to contractors. This acts as a barrier which the contractors have to face in this policy. Further, is the complicated bidding which highlights on the view that if bidding is done with the contractors of the United States, the insurance also gets included. The contractors would not be able to recover

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