What is an OCIP Project?

Introduction to OCIP

Owner Controlled Insurance Programs (OCIPs) are innovative in insuring large construction projects. With an OCIP, the project owner purchases a consolidated liability policy that covers all contractors and subcontractors under one streamlined program. This differs from the traditional model, where each contractor provides their own insurance independently.

By centralizing key coverages like general liability, workers’ compensation, and umbrella through an owner-managed, projects can realize significant benefits compared to fragmented, contractor-arranged insurance. They are transforming how major construction programs manage risk and cost.

How OCIPs Streamline Construction Insurance

An OCIP fundamentally consolidates the insurance structure on a project. Rather than various layers and towers of contractor policies, one OC IP policy arranges protection for the entire team. This wrap-up approach provides:

Consistent Coverage – The entire project is covered by the same forms, terms, and conditions rather than a patchwork quilt of policies.

Coordination – Insurance processes are synchronized across the owner, GC, subs, and administrator through a unified structure.

Efficiency – Significant administrative efficiencies are gained by managing one program versus multiple contractor policies.

Control – The owner selects appropriate coverage, limits, deductibles, and safety directives to match project risks.

Cost Savings – OCIP bulk purchasing, improved loss experience, and streamlined insurance administration create overall insurance cost reductions.

Risk Management – With a holistic view of exposures, OCIP can optimize risk control and claims management across the entire construction team.

Construction Projects Well-Suited for OCIP

While any large construction project can benefit from an OC IP, programs with these traits are especially viable candidates:

• High total value – $50 million+ in construction
• Long duration – 2+ years from start to completion
• Numerous contractors – 50+ contracting entities
• Complex design – leading-edge engineering with non-standard risks
• Tiered subs – multiple layers of subcontractors
• Large team – 500+ active workers on site
• Government project – meets public insurance mandates
• Transportation infrastructure – bridges, highways, rail
• High-profile venue – stadium, museum, convention centre
• Hospitals and healthcare facilities – manage health hazards
• Condominium towers – owner interest in insurance control
• University campus expansion – sophisticated risk approach
• Joint venture projects – combining multiple developers
  

Any major construction program sizeable in scope, lengthy in schedule, intricately designed, and has a stratified contractor hierarchy can derive advantages from implementing an OCIP.

Key Factors in Evaluating OCIP Feasibility

While OCIPs offer advantages, they must be strategically matched to a project’s unique characteristics. As part of the initial feasibility analysis, key considerations include:

Owner Risk Preferences – Risk tolerance, desire for insurance control, experience with OCIPs or CIPs, and internal resources to manage the program.

Project Funding – Ability to fund OCIP policy premiums and carry retention levels. Flexibility around insurance cost certainty.

Contracting Strategy – Impacts of requiring contractors to enrol in OCIP vs. providing own insurance.

Project Delivery Method – Suitability of OC IP model for DB, DBB, IPD, or other project delivery approaches.

Geographic Location – Insurance regulatory environment, prevailing laws, union workforce considerations.

Trade Contracting Mix – Risk profiles associated with trade types needed on the project.

Safety Factors – Historical contractor safety records. Site risks. Traffic/public safety considerations.

Insurer Appetite – Carrier openness to underwrite a policy based on exposures, risk mitigation, limits, and past loss history.

The ideal candidate is a significant project undertaken by an established developer able to navigate the dynamics of implementing and optimising an OC IP.

Top Benefits of OCIP for Project Owners

From the project owner’s perspective, driving factors behind establishing an OCIP include:

Insurance Cost Savings

OC IP provides bulk purchasing discounts, improved loss experience, reduced contingencies/overheads, minimised risk-related change orders, and greater insurance cost certainty.

Enhanced Project Control

Owners can mandate appropriate coverage, limits, terms, conditions, deductibles, safety directives and procedures tailored to the project’s distinct risks.

Streamlined Insurance Administration

By managing one consolidated program versus tracking multiple contractor policies, redundancy and workload is reduced.

Optimised Risk Management

OC IP takes a big-picture view of risk across the project lifecycle, enabling improved safety, claims coordination, mitigation of overlapping risk transfer, and reduced insurance disputes.

Contractor Focus on Construction

With their insurance duties minimised through mandatory OC IP enrollment, contractors can allocate more resources directly to productive field work rather than administrative activities.

Increased Collaboration

The OCIP model fosters collaboration between the owner, general contractor, brokers, underwriters, and subcontractors across risk management and insurance.

More Competitive Bidding

With OC IP in place, contractor pricing excludes redundant insurance costs, allowing optimisation of construction bids.

Accountability Around Safety

The shared emphasis on safety and prevention drives reduced incidents and claims, lowering costs. OC IP builds in accountability.

Implementing an OCIP Program

The typical steps involved in planning and rolling out an OCIP include:

Initial Feasibility Analysis

Review project plans and risk profiles. The model projected OC IP costs compared to conventional insurance. Assess team experience, capacity, and contracting strategy fit. Determine if OCIP makes sense for the project.

Engage an OCIP Administrator

A specialist administrator like Aon or Gallagher Bassett can design and execute a tailored OC IP program objectively. Third-party administrators have managed hundreds of OCIPs. Look for deep expertise across the entire process. Admin fees are usually recaptured via OC IP savings.

Shape OCIP Strategy

Consider factors like carrier market options, coverage structure, safety plan integration, premium payment logistics, contractual risk transfer requirements, change order procedures, audit controls, administration systems, and overall risk management philosophy.

Select Insurer and Finalize the Policy

With administrator guidance, evaluate the insurer’s financial strength, experience, services, and commitment to the construction segment. Negotiate policy terms, premiums, audits, dividends, and exclusions. Confirm insurer has robust claims and loss control resources/support.

Update Contract Documents

Include provisions in bid specifications, contracts, risk transfer, enrollment protocol, non-compliance consequences, change order procedures, safety mandates, and administrative requirements to facilitate O CIP execution.

Fund OCIP Premiums

Calculate and set aside the budget needed to fund estimated insurance premiums, fees, and deductible obligations. Lock in OCIP costs upfront. Maintain contingency reserves to cover additions during the project. Consider premium payment structures.

Enrol Contractors

All awarded contractors and subcontractors must complete enrollment paperwork to become insured under the OC IP policy before starting on site. Verify non-duplication of coverage. Monitor and enforce compliance. Update records with new contractors.

Oversee OCIP Administration

Proactively oversee day-to-day insurance administration, loss control, safety directives, claims, certificates, audits, modifications, analytics, notifications, and related OC IP activities over the construction cycle to maximise program results and contractor engagement. Provide regular updates to the insurer.

Core OCIP Insurance Coverage

A project OCIP from insurers like Zurich, Liberty Mutual, or CNA typically includes the following coverages structured under one owner-controlled policy:

General Liability

Protects against third-party legal liability related to bodily injury, property damage, or personal injury claims that occur during ongoing construction as well as completed operations losses after turnover. Defence costs are also covered. Policy limits often $5M per occurrence or higher. Includes contractual liability provisions.

Workers Compensation

Covers medical, disability, death benefits and associated costs for employees of insured contractors who suffer an injury or illness caused or aggravated by work activities. Usually structured with statutory limits per accident. Mandatory coverage in nearly all states.

Excess/Umbrella Liability

Additional limits above general liability, often in layers of $10M, $25M or higher. Provides an extra cushion against catastrophic claims or lawsuits—vital supplements, especially on higher risk projects.

Builder’s Risk

First-party property coverage for materials, equipment, and partially completed work at the construction site for “all risks” of physical loss or damage. Valuable complement but not core OCIP coverage. Limits tied to construction values.

The OC IP team tailors policy forms, exclusions, deductibles, definitions, and limits to meet the distinctive risk characteristics of the project using proprietary risk analytic tools. An experienced broker advisor guides to craft optimal coverage terms within the owner’s risk financing philosophy.

Managing an Active OCIP Project

Once the OC IP is implemented and contractors are working on site, key aspects of managing the active program include:

Safety and Loss Control

Proactive safety protocols, incident investigation, root cause analysis, near-miss assessment, job hazard analysis, training initiatives, contractor accountability, compliance enforcement, data tracking, and robust OCIP administration instil a safety culture. This minimises claims and improves outcomes for all parties.

Claims Coordination

Take a coordinated approach to claims adjustment between owner, contractors, insurer and admin to determine compensability quickly, activate return-to-work programs, and resolve issues for the benefit of the project. Monitor claims activity in real-time by cause of loss, contractor, body part, and other variables.

Insurer Collaboration

Maintain open communication with the insurer and brokers to optimise claim settlements, obtain guidance, schedule audits, review loss runs, confirm certs, and work through challenges. Provide frequent updates on project changes that may affect risk.

New Contractor On-Boarding

Quickly enrol contractors added during construction. Verify their scope is not already covered and document OCIP status. Avoid coverage gaps through diligent project tracking. Update insurer records.

Change Order Review

Promptly assess the impact of substantial project changes on the OCIP and determine if premium modifications are required. Notify the insurer when major changes in the project risk profile occur.

Insurance Certificates

Collect certificates from non-enrolled entities verifying they carry adequate insurance limits specified by the contract. Confirm no conflicts or gaps exist with OC IP coverages.

Monthly Performance Reviews

Standing update meetings between OC IP administrator, general contractor and owner to discuss program trends, issues, action plans, audits, safety, and insurance analytics. Identify improvements. Maintain aligned priorities.

Transitioning Out of the OCIP

As construction nears completion, key steps in winding down the OCIP include:

Notify Contractors

Alert enrolled contractors/subs in advance that OCIP coverage will terminate on a specified date. They must reactivate their conventional insurance policies to avoid gaps after project completion and turnover.

Collect Certificates

Require current certificates of insurance from all existing contractors showing their new or renewed coverages are in effect without lapses—review for compliance.

Final Audits

Perform final payroll and other OCIP audits to determine ultimate premium adjustments. Resolve any audit disputes. Settle up and issue final OCIP billings to contractors and owners.

Terminate OCIP Policy

Cancel the active project OC IP policy upon confirming all contractors have secured replacement coverage.

Renew For Warranty

Consider renewing the OCIP for a defined warranty period to extend coverage for defects repair, maintenance, callbacks or other post-turnover risk exposures.

Convert to CCIP Wrap

Rather than renew OCIP, some owners will convert to a Contractor-Controlled Insurance Program, where the general contractor now arranges wrap-up coverage for remaining work.

Secure Completed Ops Coverage

Ensure products/completed operations coverage adequately continues through the statute of repose period. Tail policies may be needed for specific exposures like pollution liability. Identify any new risks requiring specialised ongoing coverage.

The goal is to methodically transfer risks back to conventional insurance platforms while avoiding coverage gaps during closeout. An expert OCIP administrator is invaluable in navigating this transition.

How OCIPs Generate Cost Savings

When strategically structured and managed, Owner Controlled Insurance Programs can produce significant cost savings and insurance efficiency advantages:

Premium Discounts

Project owners qualify for bulk insurance discounts on consolidated premiums that individual contractors cannot access independently. OCIP provides group purchasing economies of scale.

Controlled Losses

Shared accountability and emphasis on safety help control the project’s overall loss experience, keeping workers healthy and premium costs lower.

Streamlined Insurance Administration

With insurance furnished by the OCIP, enrolled contractors avoid the burden of procuring their own policies. This frees up resources.

Fixed Premiums

Rather than fluctuate, OCIP allows owners to lock in insurance costs upfront for better financial certainty.

Reduced Risk Contingencies

Contractors reduce insurance contingency amounts in their bids since OCIP has them covered. Overall lower allowances.

Improved Risk Profiles

A coordinated OCIP claims and safety program helps minimise contractor loss run impacts that could increase future insurance costs.

Increased Cash Flow Certainty

Owners enjoy greater predictability around cash outlays for insurance costs which are fixed and known at the outset rather than varying each year.

Favourable Loss Experience

If the OCIP program produces a better-than-average loss experience, the owner may receive a dividend return from the insurer at policy expiration.

Enhanced Safety Culture

Central focus and alignment on safety reinforce the importance of prevention, driving down costly incidents and claims.

Insurance Compliance Without Effort

Mandatory OCIP enrollment ensures all contractors meet minimum insurance requirements without the compliance burden falls on each individual.

Expert OCIP Advice is Crucial

OCIPs require thoughtful design and selection of experienced OCIP program administrators and brokers to fully capitalise on these potential cost advantages.

The Future of OCIP Programs

The OCIP model is rapidly evolving and poised for expanded growth:

Increasing Adoption

More construction firms and project owners recognise the significant benefits of driving the broader implementation of major programs.

New Project Types

While historically used in commercial building, OCIP applicability and adoption is growing across infrastructure, residential, government, utility, renewable energy, multifamily, and other construction segments.

Bigger and More Complex Projects

Mega-construction programs exceeding several billion dollars in value are on the rise globally. OCIPs are a prime solution for effectively ensuring massive undertakings with sprawling risk.

Technology Platforms

New software solutions are emerging to streamline OCIP data management, document coordination, analytics, certificates, and reporting. Technology will cut administrative costs.

Insurance Innovation

As OCIP usage grows, carriers, brokers and admins will develop new risk management, predictive modelling, and pricing approaches tailored to this market. Manufacturers may also embrace OCIP.

Expanded Contractor Adoption

Given the advantages, contractors will seek out larger projects that utilise OCIPs. They will integrate OCIP capabilities into their operational expertise.

Enterprise Insurance Programs

Owners with heavy construction budgets, like hospitals, universities, and utilities, may begin to use OCIP across their entire property portfolios rather than on a one-off project basis only.

More Integrated Project Delivery

Collaborative project delivery models like IPD that bring together owners, contractors and design teams early on align well with the team dynamics of an OCIP program.

The future is bright for Owner Controlled Insurance Programs as they rapidly evolve into a core component of large construction project strategy, risk management, safety, and insurance.

Key Takeaways on OCIP Projects

• OCIPs allow project owners to purchase consolidated insurance covering all contractors under one owner-controlled program.
• OCIPs provide efficiency, control, simplified administration, improved coverage, and enhanced risk management compared to standard insurance.
• Large, complex construction projects benefit most from the specialised OCIP structure and team alignment.
• When implemented correctly, significant cost savings and risk optimisation can be achieved.
• OCIP policies typically bundle general liability, worker’s compensation, excess liability and builder’s risk.
• OCIP administrators are instrumental in designing, implementing, managing, and transitioning programs.
• For major construction endeavours, OCIPs are becoming the gold standard for effectively controlling risk and cost.