The Practice of Construction Risks Management through Insurance in the Ethiopian Federal Road Projects
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Date
2014-11
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Addis Ababa University
Abstract
Construction works are hazardous by nature and accidents are frequent and often severe. If one cannot control a risk through a business practice or transfer that risk to someone else through an indemnification clause, then he should manage that risk through insurance. Construction insurance is a practice of exchanging a contingent claim for a fixed payment to protect the interests of parties involved in a construction project. Therefore, the objectives of this research was to conduct an assessment of construction risk management practices and the use of construction insurance as a risk transfer tool in the Ethiopian Federal Road Projects.
The research revealed that contractors and consultants visit project sites as a risk identification mechanism before they submit their tender. However; insurance companies only provide insurance to road projects without visiting project sites before or during construction and do not educate other participants how to control or minimize the occurrence of construction risks. The study also indicated that construction insurance is mainly provided just to meet the demand of the client and most design professionals do not have effective professional indemnity insurance for the service they deliver.
It is therefore; important that all parties involved in road projects improve their risk management practices especially insurers need to enhance their understanding of risk management to assist their construction sector customers’ risk management in recognizing potential risks and reducing the probability of occurrence of risks in road construction projects. The parties in road projects are suggested to engage experts to ensure that insurance policies are specifically designed to road projects than adopting standard policy words forwarded by insurance companies.
It is also recommended to construction insurers to get involved in risk identification, allocation and drafting and negotiation of insurance policies before and during construction with client, contractors and consultants. It is advised to regulatory body to make mandatory to consultants to hold professional indemnity insurances when they apply to get license to the concerned authority to give service in the Ethiopian construction industry.
Keywords: Client, Consultant, Contractor, Contract, Indemnity, Insurance, Insurability, Liability, Risk Management and Road Construction.
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Keywords
Client, Consultant, Contractor, Contract, Indemnity, Insurance, Insurability, Liability, Risk Management and Road Construction