Controlled Insurance Programs (CIPs), also known as “wrap ups,” bundle together general liability insurance, workers compensation and excess liability coverage during a construction project for all or a majority of the parties involved. In addition to large individual projects, wrap ups can be used on a “rolling” basis by aggregating smaller projects which are started and completed over a defined time period. This is an efficient and cost-effective option, as it eliminates each participant having to be responsible for the procurement of their own insurance and ensures continuity of coverage.
What must be determined, though, is who is going to sponsor the wrap up. There are two options: (1) the owner or (2) the contractor, so a CIP can either be an Owner Controlled Insurance Program (OCIP) or a Contractor Controlled Insurance Program (CCIP). This indicates who is responsible for securing the insurance coverage, as well as paying for and administering the insurance program. The sponsor then has control over the costs, coverage terms and conditions, claims processes and loss prevention.
And if the CIP is run successfully, there is potential to increase profit on a project from 1 percent to 1.5 percent. This often serves as an incentive for the sponsor to focus on worker safety throughout the project and is even more important in New York, where Labor Law 240 impacts costs and liability.
In order to improve safety, minimize claims and prevent fraud within the wrap up, owners and contractors are incorporating new technology on jobsites. This includes wearables, where workers can be given sensors, allowing project managers to reference a dashboard that describes precisely who is on a jobsite at any given time, where they are and additional information about the worker, including tenure, number of training hours logged and vital signs. Video technology is also utilized more and more, where the project team can then review it like a game tape to identify any unsafe behaviors.
But the question still remains: should an OCIP or a CCIP be used? The short answer is, it depends on the end user, but let’s dive into the key considerations.
OCIP
In an OCIP, the project’s owner is making all of the decisions. Because of this, it’s important the owner understand the financial benefits and need for safety. We recently worked with Penn Medicine during the construction of their New Patient Pavilion, and recommended an OCIP as it fell in line with the philosophy of the project.
Control probably isn’t a word most construction project owners use when referring to their insurance program, but a wrap up can change the conversation. A wrap up can allow owners to streamline the administrative process and gain better control of insurance costs today and in the long-term. The potential downside of an OCIP for an owner is the collateral requirements, which can impact cash flow, and administrative burdens associated with claims management.
CCIP
While a CCIP places more risk on the general contractor, it also provides strong financial incentives to operate a safe jobsite and to keep the project on schedule and within budget. In recent years, we have seen CCIPs used more frequently than OCIPs. This may be because underwriters have been giving preferential rates to contractors since they can typically achieve better results. Given that they live and breathe safety every day, contractors generally have a great sense of control over this component of the project.
Whether leveraging an OCIP or a CCIP, it’s important to consult with a seasoned insurance broker who can take a deep dive into your business, designing an insurance program tailored to your unique needs. With either program, a comprehensive safety plan is critical to protecting workers and achieving cost savings.
