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The Impact Of Insurance Policies To Building Project Contracts
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The basic function of insurance is risk transference; risk is
transferred from one party (the insured) to another party (the insurer).
The transfer of risk by no means eliminates the possibility of
misfortune, but the insurer provides financial security and tranquillity
for the insured when the insured risk occurs. In return, an insured
pays a premium in a very small amount when compared with the potential
losses that may be suffered (Morton, 1999).
1.2 Statement of Problem
Development
of infrastructure is one of the key drivers in business over the globe;
it increases the GDP of a nation (Awodele et al. 2009). This encourage
countries to prioritize infrastructural development and make provisions
in their budgets for financing its infrastructure. This leads to new
challenges considering the risks involved in the design and production.
Construction projects due to its nature allows a lot of possibilities
for many environmental, socio-political and other problems during
pre-contract, contract and post-contract stage leading to completion
time problem, cost overruns or exceeding budget in projects and poor
quality finish (Akintoye and Macloed, 1997). In order to avoid or reduce
the losses, management of the risk involved in the construction project
is required. Nevertheless, saying Nigerian construction industry is
poor, is an understatement as the industry is characterized by frequent
setbacks or interruptions, cost overruns and abandonment of projects
(Awodele et al., 2009). These are caused by different kind of risks
involved in construction projects. Risk factors are believed to be
familiar to Nigerian construction professionals, yet the probability of
occurrence and its impact at precontract and post-contract stage is yet
to be investigated. However, there are few researches conducted on risk
management within the construction industry in Nigeria. In Nigeria, the
construction industry mainly depends on government’s budget and the
industry is performing very poor due to avoidable risk. The need for
understanding how to manage project risks becomes a very important
issue.
1.3 Research Objectives
The research broadly sought to
assess the extent to which SMEs adopt insurance as a risk management
tool and the benefits there in. Specifically, the research intended to
achieve the following objectives to:
1. Identify the various construction risk faced by construction industry
2. Examine the response of construction industry towards the use of Contractors All Risk policy (CAR)
3. Assess the benefits Construction industry derive from using insurance as a risk management tool;
4. Identify any problems Construction industry encounter in using insurance
5. Find out solutions to the challenges that construction industry encounter in using insurance.
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