Wrap-Ups—A Closer Look at Program Design

December 8, 2020

Engineer working at site of a large building project

Image credit: kittirat+roekburi/shutterstock.com

A Controlled Insurance Program (CIP, also known as a Wrap-Up) is a smart risk management tool for any construction project. However, before the first shovel hits the dirt, you have a big decision to make—who will be the Sponsor for your project?

The Sponsor is responsible for the Wrap-Up’s key elements, like Program Design, Financial Risk, Administration, and Claims Management. With an OCIP, the Owner is the Sponsor for the project. With a CCIP, the General Contractor is the Sponsor for the Project.

 

Let’s examine one of the key elements- Program Design, a little further. Program Design is the process where the insurance for the project is determined and outlined. It involves the following activities: selecting the carrier(s), negotiating the insurance terms and coverages, and identifying responsibilities.

How do these Program Design activities differ based on the Sponsor?

 

Insuring the Project’s Risk

A large construction project has an abundant amount of exposure such as safety hazards that could lead to accidents or workers’ injuries, damage or theft to equipment or tools, project delays, availability of building materials, unexpected increase in material costs, natural disasters, etc.

In the Program Design phase of an OCIP, the Owner is responsible for all these risks and can insure multiple Contractors, as well as multiple projects, under a single OCIP program. For each project, the Owner or their Broker, can approach multiple markets and Carriers, and negotiate coverage terms and limits with the Carriers.

With a CCIP, the General Contractor can only insure risk under their contract, which is often part of a pre-established Rolling Program where the Carrier is already selected. The General Contractor negotiates coverage terms and limits with the Carrier.

 

Administration & Payment

Simply put, if it is an OCIP, the Owner pays for the Program, including premium payments and any deductibles. They are also responsible for administering the program, including creating the Wrap-Up manual, all program paperwork, enrollment of Trade Contractors, entering any onsite payroll, audits, etc. The Owner works with a Broker to design the program and may hire a Third Party Administrator (TPA) to handle the administrative duties. For a CCIP, the General Contractor is responsible for all such duties.

The Sponsor has numerous responsibilities regarding Program Design. Your choice of which type of program, OCIP, or a CCIP, is a significant decision and will ultimately influence how successful your program will be.

 

To learn more about the Sponsor’s role in an OCIP or CCIP, check out our video below:

 

Let TSIB help you determine the right fit for your next construction project. Contact us today to speak with one of our Wrap-Up Specialists! TSIB is a full insurance brokerage with a team of Risk Advisors located throughout the country with offices in NJ, CT, TX, and CA.

Download TSIB's Wrap-Ups eBook!

Topics: CCIP, OCIP, Wrap-Ups

Written by The TSIB Team