In recent testimony before The Insurance and Real Estate Committee, the Professional Insurance Agents of Connecticut Inc. said it supports House Bill 5207, which would prohibit owner-controlled insurance programs (OCIP’s) on state and municipal construction projects.
“The use of OCIP’s presently is unregulated in Connecticut, and the reality is that the benefits of using OCIP’s far outweigh the problems they can cause,” stated Steven Imbriaco, Esq., PIACT government affairs counsel. The PIACT’s bulletin noted, however, that “The required use of OCIP’s in contracts for state and municipal construction projects removes competition from the market for insuring these projects by voiding contractors’ experience ratings. Instead of recognizing and choosing contractors that have maintained high standards of safety, OCIP projects allow contractors with poor experience ratings to be placed on equal footing as those with good ratings because insurance costs are removed from the bid.”
“As a result, small contractors lose a competitive edge they once enjoyed in the bidding process,” Imbriaco continued. “In turn, the same small contractors have less incentive to invest in safety equipment and training, or to emphasize a safe work environment that would better protect construction workers.”
The PIACT also cited “additional concerns for insurance agents and their contractor clients;” rhetorically asking, “if there is a major disaster on a construction site, will the overall aggregated limit of liability be adequate to cover all the participating contractors? And if not, how would the coverage be apportioned?”
The organization also “takes issue regarding coverage gaps. Insurance agents working with contractor-clients may have difficulty crafting a seamless package of protection for clients when a major job is covered by an OCIP, over which agents have no control.”
“Other problems can arise in providing and securing the appropriate rate credits on the contractor’s own coverage to reflect the coverage provided by the OCIP,” Imbriaco indicated. “When cost is a consideration in awarding the OCIP, there always is potential that the coverage chosen will not consider all the needs of the individual contractor.”
The PIACT pointed out that “when contractors are not allowed to include insurance costs in their bids they are not necessarily assured of a reasonable offset in their ongoing insurance costs, especially if they want to be sure of having appropriate coverage for other concurrent jobs, for their vehicles, etc.”
According to PIACT, which consistently supports bills that protect insurance consumers, the prohibition against OCIP’s proposed by H.B. 5207 is “in the best interest of the insurance consumers of Connecticut.”
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