Assessment of Builders’ Risk Insurance Implementation in The Nigerian Construction Industry
Assessment of Builders’ Risk Insurance Implementation in The Nigerian Construction Industry
ABSTRACT
Generally, there have being low patronage of insurance by construction industry.Builders‘ Risk Insurance (BRI) is a policy that provides coverage for risks that occur during construction of buildings.
The desired benefit of BRI to the stakeholders would only be attained if the policy is successfully implemented. BRI policy is relatively new and the level of implementation in the Nigeria construction industry is yet to be assessed.
Therefore, the study was aimed to assess the implementation of BRI policy in theNigerian construction industry.
The focus was on the level of awareness, compliance, enforcement and barriers to implementation of the policy. A mixed method research design was adopted which includes both quantitative and qualitative research methods.
The quantitative method involved the use of questionnaires in which 118 questionnaires was designed and administered to construction companies and 26 questionnaires was administered to insurance companies.
The construction companies were selected using convenience sampling and a census was taking for insurance companies.
TABLE OF CONTENT
Title page ………..i
Declaration………….ii
Certification ……….iii
Dedication………….iv
Acknowledgments ………… v
Abstract……… vi
Table of Contents………..viii
List of Tables………….. xi
List of Figures……….xii
List of Appendices…….xiii
CHAPTER ONE ………………………………………………………………………………………………. 1
1.0 INTRODUCTION ………………………………………………………………………………………. 1
1.1 Background of Study …………………………………………………………………………………… 1
1.2 Statement of Problem ………………………………………………………………………………….. 3
1.3Justification of the Study………………………………………………………………………………. 4
1.4Aim and Objectives………………………………………………………………………………………. 4
1.4.1 Aim……………………………………………………………………………………………………………………… 4
1.4.2 Objectives…………………………………………………………………………………………………………….. 4
1.5Scope and Limitations………………………………………………………………………………….. 5
1.5.1 Scope…………………………………………………………………………………………………………………… 5
1.5.2 Limitations……………………………………………………………………………………………………………. 5
CHAPTER TWO ……………………………………………………………………………………………… 7
2.0LITERARTURE REVIEW ………………………………………………………………………….. 7
2.1 Risks Associated with Construction Projects………………………………………………… 7
2.1.1 Project Risk…………………………………………………………………………………………………………… 7
2.1.2 Project Risk Management………………………………………………………………………………………. 8
2.1.3 Project Risk Transfer ……………………………………………………………………………………………. 11
2.2 Relevance of Insurance to the Nigerian Construction Industry……………………. 12
2.3 Insurance Regulation in Nigeria…………………………………………………………………. 13
2.3.1 Overview of Insurance in Nigeria…………………………………………………………………………… 13
2.3.2 General Compulsory Insurance in Nigeria ………………………………………………………………. 14
2.3.3 Building and Property Insurance in Nigeria …………………………………………………………….. 14
2.4Builder’s Risk Insurance Policy ………………………………………………………………….. 16
2.4.1 Concept and Definition of Builders Risk Insurance…………………………………………………… 16
2.4.2 Coverage of Builders Risk Insurance ………………………………………………………………………. 17
2.4.3 Exclusion to Builders Risk Insurance ………………………………………………………………………. 18
2.4.4 Extensions to Builders Risk Insurance…………………………………………………………………….. 18
2.4.5 Situations when Builders’ Risk Insurance Coverage End or Ceases…………………………….. 20
2.5Role of National Building Code in Ensuring Compliance with BRI………………. 20
2.6 Awareness to the Implementation of BRI policy …………………………………………. 22
2.7 Enforcement of Insurance Policy in Nigeria ……………………………………………….. 23
2.8Barriers Militating Against Implementation of BRI Policy in Nigeria…………… 23
CHAPTER THREE………………………………………………………………………………………… 28
3.0RESEARCH METHODOLOGY ………………………………………………………………… 28
3.1 Research Design ………………………………………………………………………………………… 28
3.2Population, Sample Size and Sampling Technique ………………………………………. 28
3.2.1 Construction Companies………………………………………………………………………………………. 28
3.2.1.1 Population and Sample Size ……………………………………………………………………………….. 28
3.2.1.3 Sampling Technique ………………………………………………………………………………………….. 29
3.2.2 Insurance Companies…………………………………………………………………………………………… 30
3.3 Data Collection………………………………………………………………………………………….. 30
3.3.1 Questionnaire Survey…………………………………………………………………………………………… 30
3.3.2 Interview ……………………………………………………………………………………………………………. 31
3.4 Data Analysis…………………………………………………………………………………………….. 32
3.4.1 Quantitative Data Analysis……………………………………………………………………………………. 32
3.4.2 Qualitative Data Analysis ……………………………………………………………………………………… 33
CHAPTER FOUR…………………………………………………………………………………………… 34
4.0 DATA PRESENTATION, ANALYSIS AND DISCUSSION ……………………….. 34
4.1 Questionnaire Response Rate …………………………………………………………………….. 34
4.2Respondents Profile for Construction Companies ……………………………………….. 35
4.3 Respondents Profile for Insurance Companies……………………………………………. 37
4.4 Awareness of BRI policy ……………………………………………………………………………. 37
4.4.1 Nature of Construction Covered by BRI………………………………………………………………….. 37
4.4.2 Type of building covered by BRI…………………………………………………………………………….. 38
4.4.3 Nature of Risk Covered by BRI ………………………………………………………………………………. 39
4.4.4 Legislation that covers BRI ……………………………………………………………………………………. 40
4.5Level of Enforcement of Builders’ Risk Insurance……………………………………….. 41
4.5.1Enforcement of BRI by NAICOM …………………………………………………………………………….. 41
4.5.2 Enforcement of BRI by FCDA…………………………………………………………………………………. 43
4.6Level of Compliance with Builders’ Risk Insurance …………………………………….. 44
4.6.1 Frequency of taking BRI Policy………………………………………………………………………………. 44
4.6.2 Level of Agreement on Frequency of taking BRI………………………………………………………. 45
4.6.2 Frequency and Nature of Sanctions……………………………………………………………………….. 47
4.7 Barriers to implementation of BRI …………………………………………………………….. 48
4.7.1 Level of Agreement on barriers to implementation of BRI………………………………………… 52
4.8 Proposed framework for Enhancing Implementation of BRI………………………. 53
4.8.1 Regulations…………………………………………………………………………………………………………. 54
4.8.2 Awareness………………………………………………………………………………………………………….. 55
4.8.3 Enforcement……………………………………………………………………………………………………….. 55
4.8.4 Compliance…………………………………………………………………………………………………………. 56
CHAPTER FIVE ……………………………………………………………………………………………. 57
5.0SUMMARY, CONCLUSIONS AND RECCOMMENDATIONS …………………. 57
5.1 Summary of Findings ………………………………………………………………………………… 57
5.2 Conclusions……………………………………………………………………………………………….. 58
5.3 Recommendations……………………………………………………………………………………… 58
5.4 Contributions to Knowledge ………………………………………………………………………. 59
REFERENCES……………………………………………………………………………………………….. 60
APPENDICES………………………………………………………………………………………………… 65
INTRODUCTION
Construction industry is subjected to different types of risk such as project, financial, construction risks etc. Other risks include theft, vandalism, accidents and building collapse (which can lead to injury to workers and third parties).
These can have adverse effect leading to stoppage of works, abandonment of project, financial difficulties to contractors and failure of clients to realise the project goals(Hansen, 1990).
Performance of the industry is also affected by poor risk management when compared to other industries (Renuka, Umarani and Kamal, 2014).
One of the major risk management approaches in construction is the provision of insurance cover which is the exchange of a certain amount of fixed payment to protect the interest of the parties involved (Bunni, 2003).
Insurance does not only help to transfer risk but also help to recognise potential risk and reduce the probability of its occurrence by taking coverage which reflects efforts at risk prevention (Perera, Rathnayake andRameezden,2008).
Insurance is also important to the construction industry and policy holder as it replaces insecurity with security and stability (Nwite, 2014).
Most insurance policies are contracts of indemnity for a contractor which distinguishes them from performance bonds (Odeniyi, 2006).
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