A large project or a combination of midsized projects will benefit financially depending on several factors, such as: location, type of construction, the construction manager, the subcontractor environment, the insurance market, and how the OCIP is purchased in the insurance market. By underwriting a large project, your insurance company spreads the risk across the large number of project employees. Two cost factors influence your financial savings, Fixed and Variable:
Fixed Costs:
These costs are built into the project. Traditionally, a subcontractor includes insurance costs in his bid, then the general contractor includes their insurance, and the owner adds contingency coverage on top of that creating three tiers of insurance, paid at higher, individual rates. In a wrap up your project saves by lowering the fixed cost portion. Due to economies of scale you can purchase a single plan for the entire project for less than the traditional cost of insurance. With a single insurance carrier you purchase your insurance in bulk, so you have more participants paying less for greater coverage.
Variable Costs:
The variable portion is dependent on the amount of risk the sponsor assumes and the number of claims made over all. The higher risk might mean the sponsor covers a $250,000 deductible per claim for the overall project. This provides incentive for safety first and a strong claims management program. The safer the site, the more money the sponsor saves.
By negotiating savings to lower your Fixed costs at the outset, and accepting higher risk variables to reward low-incident sites, your project saves a great deal of expense.
