A study of current construction insurance issues in Taiwan: From the perspective of Owner Controlled Insurance Program
Date Issued
2010
Date
2010
Author(s)
Lu, I-Feng
Abstract
In view of the ever-increasing complexity & magnitude of the construction works in terms of both project size & number of parties involved, the traditional method of insurance arrangement by individual contractors has failed to meet the risk management objective for the project owner nowadays. The adverse impact of a traditional construction insurance approach could be manifold such as: inconsistent & inadequate policy covers; more restrictive insuring terms & conditions; mid-term policy cancellation or even absence of cover by some contractors; insurance policy issued with markups on premium costs, etc. Moreover, insurance overlaps or gaps in different policies will inevitably invite claims disputes as well as delay and uncertainties in claims settlement. In order to address the said problems, the scheme of Owner-Controlled-Insurance-Program (OCIP) has emerged as an effective solution.
This research attempts to summarize and highlight the major characteristics, peculiar features and core values of the OCIP by conducting in-depth analytical review of the related documentation, dossier and academic literature works available for study. Following an extensive research & empirical investigation of numerous construction projects in Taiwan, this paper identifies a number of practical problems arising from the methods & management of insurance procurement. Also, by means of case studies this research proceeds to examine and compare the modus operandi and insurance policies relating to those construction work projects that have engaged the concept of OCIP in their insurance purchasing process. The departments under our review include Taipei Rapid Transit System, Taiwan Power Co. (TaiPower), China Petroleum Corp. (CPC), and BOT projects like Taiwan High Speed Railway, Kaohsiung Metro as well as the Taipei Airport Underpass project. The paper continues with a comparative analysis of the OCIP insurance arrangement taken out by Department of Rapid Transit Systems (DORTS) and the annual open policy project cover arranged by Taiwan Power Co.
Our review of available evidence suggests that the adoption of the OCIP for public work projects in Taiwan have achieved premium costs reduction coupled with broader & favorable insurance policy terms & conditions. Besides, OCIP also helps tackle those problems inherent in the traditional method of obtaining insurance by individual contractors under the project. In short, this research purports to identify, discuss and review the various insurance arrangement problems commonly encountered by the construction sector in Taiwan. After analytical & empirical assessment of Owner-Controlled-Insurance-Programs undertaken by some Taiwan construction project sponsors, it’s hoped that the recommendations provided in this work will inspire the officials concerned and would serve as meaningful directives in implementation of OCIP for future projects in Taiwan.
Subjects
Construction Insurasnce
Owner Controlled Insurance Program
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