Owner Controlled Insurance Programs versus Traditional Insurance Term Paper

Owner Controlled Insurance Programs versus Traditional Insurance Programs - terminal Paper ExampleIt is purchased by construction owner for the benefit of builders or contractors engaged with the project, which includes compensation of workers, common liability, pollution liability, builders risk and professional liability among others. OCIP is a comparatively new vehicle in policy sector for residential projects. Due to rapid growth of defective constructive designs, these policies be becoming passing popular among the builders and the contractors (Grenier, 2001). The study is mainly based on the analysis of OCIP versus Traditional indemnification policy course of studys. 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 tr aditional insurance policies.Risks Associated with OCIPOCIP is commonly known as Wrap-Up Policy in United States. Both the OCIP and traditional policies were developed in 1950s. 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 come to in the project but in case of traditional insurance program, it is not applic fit (Olson, 2006).... Although OCIP provides many benefits, there are various risks associated with it both for owners as well as contractors which are stated under Risk of Owners The risk put up 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 presumable to increase. OCIPs are useful mainly in large projects, f lyspeck 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 conduct a negative impact on the contractors (Gibson, 2006). There is always a market risk associated with all(prenominal) 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 legitimate 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 observe by certain significant factors. For example, limited insurance coverage is one of the vital aspects which focuses on the limitations in the insurance polic ies 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