Management of construction risk through contractor's all risk insurance policy : a South Africa case study

Contractors’ All Risks (CAR) is a special insurance cover, which insurances those losses not covered by an ‘excluded peril’ in a construction contract. The benefit to the insured under this type of policy is that the burden is shifted to the insurer who, to resist the claim, is required to show that the cause of the loss falls within an exclusion. The objective of the current research is to study the efficency of CAR in mitigating construction risk and to determine the factors which affect the use of CAR insurance policy in South Africa. The data for the study were derived from both primary and secondary sources. The primary data was obtained through the survey method, while the secondary data was derived from the review of literature. The primary data for the study was collected through a structured questionnaire survey distributed to a sample of 67 contracting firms who had taken CAR insurance and are curently using CAR in mitigating construction risk and 6 insurance companys who insure contractors under this policy. Findings from the study revealed that CAR Effectively covers work in progress, CAR protects the contractor’s interest effectively, CAR policy also protect the client’s interests effectively and that CAR assist the contractor in risk management by recognising potential risks and reducing the probability of such risks. Whilst the factors which affect the use of CAR insurance policy in the South Africa construction industry include: stipulation of the adopted conditions of standard construction contract, client’s requirement, cost and contractor’s own interest. The study adds to the body of knowledge on the use of CAR in the management of construction risk in the South Africa construction industry.Non UBCUnreviewedFacultyOthe