Contractor-Controlled Insurance Programs (CCIPs, also called wrap-ups) are an alternative method for insuring large construction projects (typically more than $200 million) that have numerous subcontractors.
Rather than having each subcontractor provide its own insurance, GCs can create a single insurance program that covers all parties involved, which can translate into significant project savings.
As the name implies, CCIPs offer centralized control for a single large project (or a number of smaller projects) leading to a safer risk management process. The colloquial term “wrap-up” has a similar origin – all insurance and risk management is wrapped up into one program. Relying on one policy provides better protection through broader policy language, raises liability limits, reduces losses, simplifies claim management, and extends liability coverage.
However, CCIPs are much like city skylines – they constantly change with the growing construction market. Those changes should merit attention not only from large GCs, but also smaller contractors that have previously operated below the typical $200 million financial threshold. Even if your company isn’t a GC, but it frequently performs work on wrap-up projects, it’s still a good idea to better understand these programs in order to streamline future work.
To help you become more familiar with the new CCIP landscape, this article provides a quick refresher on wrap-ups, an overview of CCIPs’ rising popularity, and a guide to organizing and administering CCIPs to leverage savings.
How a CCIP Works
Bulk Pricing
One of the major benefits of a CCIP is its scale. Buying insurance in bulk leads to lower premiums for various coverages offered in these programs, which can include Commercial General Liability, Workers’ Comp and Employers Liability, and Commercial Excess Liability.
Complete Coverage
CCIPs are effective at ensuring fewer coverage gaps, which can lower or at least clarify risk overall. Traditionally, each subcontractor on a project presents its own policies to cover risks. However, buying individual coverage is typically less cost competitive, often resulting in duplicate coverage as well as gaps in coverage. When a CCIP is not in place, higher insurance premiums might be factored into the cost, and the GC can have greater exposure to losses if individual contractors do not have sufficient coverage.
Absent a CCIP, best practices suggest that a GC secure certificates of insurance from each subcontractor working on the project. However, this process is time-consuming and cumbersome due to the complexity of the information to include. Using a CCIP ensures that all subcontractor insurance is consistent with regard to effective dates, coverage, and limits.
If designed correctly, CCIPs should also reduce the likelihood of litigation between owners, contractors, subcontractors, etc., because all participants are insured under the same program. If something does go wrong, a well-structured CCIP offers less disruption and smoother claims processing because there’s typically one insurance carrier to adjust the loss.
CCIPs may also help GCs to extend more opportunities to smaller and Disadvantaged Business Enterprises (DBEs) that might otherwise be unable to fulfill standard insurance requirements, which could lead to future work on contracts that later require DBE participation.
Safety-Based Savings
Ultimately, CCIP savings depend largely on a contractor’s safety program. CCIPs are “loss sensitive” – that is, insurance costs are more directly related to insurance claims. They usually have high deductibles, but offer significant savings if fewer claims are filed. While it puts more financial risk on the contractor, there is also more opportunity to save.
Final net costs of a project enrolled under a CCIP will be ultimately determined at the project’s conclusion. A typical per-occurrence deductible for a CCIP program is $250,000. Subcontractors insured under their own insurance program usually carry deductibles less than this, but the subcontractors enrolled in a CCIP don’t have the burden of any deductible – the GC incurs those costs.
For that reason, CCIPs can help incentivize safer activities. GCs are motivated to create a comprehensive and centralized safety program because any money not paid toward those high claim deductibles is potential profit.