Q. Is now a good time to consider Controlled Insurance Programs (CIPs)?
A.CIPs – commonly referred to as Wrap-ups – “wrap up” several insurances, such as Workers Compensation, Commercial General and Excess Liability, along with safety, claims management and risk management strategies into a comprehensive program that protects all parties involved, including the project owners, general contractors and subs. Wrap-ups have been around for half a century; however, more and more project owners and general contractors are embracing the concept on both a project basis as well as on a rolling CIP basis. Construction costs are escalating and CIPs have the potential to reduce project costs by approximately 1-2% compared to traditional insurance programs.
Q: What is the sponsor’s role?
A:The type of controlled insurance program or “CIP” is determined by the nature of the sponsor. The owner of a construction project sponsors an Owner Controlled Insurance Program (OCIP), while a general contractor sponsors a Contractor Controlled Insurance Program (CCIP). The sponsor is in charge of securing, paying for and administering the insurance program. An insurance broker help the sponsor navigate the sometimes daunting and time-consuming process of selecting the insurance carriers who will provide coverage and also to negotiate the policy terms, conditions and limits.
Q: How do CIPs save owners and contractors money?
A:Since Wrap-ups are loss sensitive, the ultimate insurance costs for a project are directly related to the claims activity on the project. Therefore, implementing a comprehensive safety plan is critical to achieving cost savings. Also, wrap-ups represent an opportunity to reduce insurance costs through the purchasing power of a single, large buyer versus the many layers of contractors on a given project. Finally, with the ever-changing interpretations of policy language and “additional insured” status under insurance policies, having one single policy eases claims handling and reduces litigation costs because there are fewer insurance companies involved in the project.