OCIP vs. CCIP: Choosing the Right Insurance Program for Your Construction Project

By Matt Barber of PCF Insurance Services

In the world of construction, navigating the diverse landscape of insurance programs can feel as complex as coordinating a large-scale project itself. With many policies, regulations, and terms to decipher, making the right choice for your construction project is crucial. It can be the difference between a well-protected, smoothly run operation and a storm of liabilities, unexpected costs and time delays.

Owner Controlled Insurance Programs (OCIP) and Contractor Controlled Insurance Programs (CCIP) are both insurance programs that offer uniform, consolidated coverage for various risks involved in large construction projects. However, their structures differ in critical ways, influencing the management of risks, costs and responsibilities. While the choice between OCIP and CCIP often hinges on the specific project’s details and the stakeholders’ preferences, knowing the fundamentals of each program is an invaluable asset.

Understanding Insurance in Construction

Insurance serves as a defense against uncertainties, protecting your investment, workers and the public. However, the question isn’t just about having insurance; it’s about having the right kind of insurance.

The Role and Importance of Insurance in Construction

Insurance in construction serves multiple critical roles:

• Risk management: Construction projects inherently involve various risks—from worker injuries to property damage, and from delays due to unforeseen circumstances to lawsuits. Insurance helps manage these risks by providing financial coverage, ensuring project continuity.
• Legal compliance: Many jurisdictions require certain types of insurance as a legal prerequisite for construction work. Compliance with these regulations is not just necessary for lawful operation, but it also contributes to industry standards and safety norms.
• Financial stability: Insurance policies can save construction projects from potentially crippling financial losses. They offer a safety net that can keep operations afloat, even when unexpected incidents occur.
• Confidence building: Having robust insurance coverage fosters trust among project owners, contractors, investors and stakeholders. It signals a proactive approach to risk management, adding a layer of credibility and security to the project.

The Simplified Guide to Choosing the Right Construction Insurance

Choosing between an Owner-Controlled Insurance Program (OCIP) and a Contractor-Controlled Insurance Program (CCIP) is not straightforward. Both insurance types have transformed risk management in construction, but come with their unique sets of advantages and drawbacks. This guide will offer a concise overview to help you make an informed decision for your project.

OCIP and CCIP: A Side-by-Side Comparison

OCIP (Owner-Controlled Insurance Program)

• Controlled By: Project Owner
• Pros:
  • Comprehensive, uniform coverage
  • Potential cost savings
  • Greater control for the owner
• Cons:
  • Administrative burden
  • Risk of cost overruns
• Ideal For: Large, complex projects where the owner wants more control

CCIP (Contractor-Controlled Insurance Program)

• Controlled By: Contractor
• Pros:
  • Simplifies insurance management for the owner
  • Potential cost efficiencies
  • Enables contractors to manage risks
• Cons:
  • Less control for the owner
  • May lead to higher bid prices
• Ideal For: Projects where the contractor has a strong safety and risk management track record

Factors to Consider for Your Choice

• Project Size: OCIPs often benefit large-scale projects due to potential cost savings. For smaller projects, the administrative load might outweigh the benefits.
• Project Type: Environmental risks? OCIPs offer more comprehensive coverage. Contractor skilled in managing CCIPs? Go for CCIP for its convenience.
• Risk Profile: Understand your project’s risks. If the owner is better at risk management, OCIP might be suitable; otherwise, consider CCIP.
• Administrative Capabilities: Have the resources to manage the chosen insurance efficiently.
• Control Preference: Want more control? Choose OCIP. Comfortable with less control? Go for CCIP.

Balancing Stakeholder Perspectives

Both the owner’s and contractor’s perspectives matter. The owner may prefer the OCIP’s control and coverage, while the contractor may favor a CCIP that lets them manage risks effectively. It’s crucial to consider all viewpoints to arrive at a balanced choice.

Constructing Confidence: Final Thoughts

Understanding the intricacies of OCIP and CCIP can make all the difference. Both insurance types offer unique advantages, from comprehensive coverage and control with OCIPs, to simplified management and cost efficiencies with CCIPs. Yet, they also have potential downsides that you need to carefully consider.

The decision between OCIP and CCIP should stem from your project’s characteristics, including its size, type and risk profile, alongside the available administrative resources and your preference for control. It’s also crucial to balance both the owner’s and contractor’s perspectives to ensure a successful project outcome.

Matt Barber, PCF Construction Practice Leader, is a licensed adjuster, property and casualty and life insurance agent as well as a certified insurance counselor (CIC). He has 30 years of experience in the insurance industry with a focus on commercial risks and construction specialties. His career in the insurance industry melded with construction when a friend started a construction company, allowing his role as an insurance broker to grow with his friend’s business. Barber’s passion for construction insurance grew as he realized how unique of a market it can be. His dedication to his clients is best-in-class and his services include full commercial insurance, personal lines, claims and a specialty in evaluating clients’ risk and finding creative solutions through risk management programs. He was named 2014 Utah Agent of the Year, was President of Utah Independent Agents in 2019 and has been one of the Big I’s Best Practice Agency’s for fourteen years in a row. In his free time, Barber is the co-founder of a nonprofit that enhances the lives of Veterans through recreational fishing activities and is involved with various community boards and leadership roles. He can be reached through PCF’s website.