Insurance & finance

Integrated Project Insurance: a joined up approach to construction

Kim Vernau of BLP Insurance discusses how to protect your project from the ills of cumulative risk

contractors, consultants and others in the supply chain, is widely understood in terms of its importance. In the hunt for a solution to this fundamental problem, the introduction of Integrated Project Insurance (IPI), whereby the client and project team are collaborating under a single insurance policy, marks a significant milestone. Within the construction industry, the current insurance framework is


outdated and at odds with this collaborative approach. Instead, a culture of passing risk down the supply chain has become increasingly embedded in the industry, creating a defensive and insular system whereby each member of the construction process has to insure the risk under their own insurance policy. Industry players have come to accept litigation and subsequent legal costs as the norm in the event of an issue arising during the project delivery, with parties taking opposing positions to avoid risk of liability. This approach not only fails to assess the accumulative real risk with a project, but is also unhelpful for the end client. Despite the day-to day reality of this defensive approach, initiatives such as

the implementation of Building Information Modelling (BIM) Level 2 and the wider Government Construction Strategy represent significant steps towards a more collaborative approach. BIM has been developed to change the dynamics of the construction supply chain by unlocking more efficient ways of working together. The UK government took the major step of mandating the use of BIM by 2016

he concept of proper integration and collaboration when it comes to managing the insurance process is not new to the construction industry. Aligning the interests of all industry players, whether it is clients,

in its 2011 Construction Strategy, for use by all central government projects. This was to address the inertia inherent in analogue methods and to promote change through a dominant client forcing it on its suppliers. The government mandate to its own departments has taken five years of mentoring to achieve, and is yet to complete. The cultural shift required is considerable both in terms of challenging established ways of working and exploiting the benefits of collaboration for better project delivery. The industry needs to move forward. To enable the required cultural change

IPI provides the opportunity for one single policy to protect the entire construction delivery team (client, contractors, consultants and specialists), instead of a myriad of individual construction insurances. IPI could transform the way that construction projects are insured. As well as covering the project risk, crucially IPI also covers any financial loss that might result from a flaw in the construction project, without the requirement to prove fault by the party from whom the problem has originated. Eliminating the blame culture in the construction industry, by doing

away with the need to prove fault on the part of one individual, will help to foster a more collaborative approach that puts the client’s needs first; delivering the project on time, within budget and in line with the agreed specification. The idea that a team can either stand or fall together under the combined liability will promote shared responsibility and naturally result in any problems or issues being resolved more quickly. Looking at how IPI works in practise, the starting point for any project is to

assemble a team and then to draw up a strategic brief and cost plan including the specification, time frame, cost and maximum liability. The involvement of a technical and cost assessor throughout the project delivery serves to identify any issues early on in the cycle and reduce the risk of anything going wrong. In the event that the project fails to deliver the specifics outlined in the strategic brief, then the IPI will respond to any losses. The construction of a new Centre for Advanced Building Technologies at

Dudley College was one of the first projects to operate with IPI. Alongside SECO, BLP Insurance was appointed as the local Technical Inspection provider on the Advance II project. IPI brokers Griffiths & Armour agreed terms between the Alliance (Dudley College and its five industry partners) and underwriters, with the first IPI policy undertaken and the project successfully completed earlier this year. It’s hard to say with certainty what impact IPI will have on the construction

industry, and determining whether initial trials have been successful could take some time. Nonetheless, the significant strides that have already been taken to adopt this new approach indicate that a progressive attitude to problem solving and much needed willingness to collaborate is starting to permeate throughout the industry.

Kim Vernau is the CEO of BLP Insurance | HMM January 2018 | 47

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