An analysis of risk preferences and insurance policies within the Maltese construction industry

Abstract

The purpose of this study is to explore the risk profile of contractors and the insurance products used in order to mitigate against these risks. Existing literature on construction insurance was reviewed in order to identify gaps in knowledge while identifying similar practices undertaken abroad. However, with regards to insurance and construction as a risk management tool in the Maltese scenario, the literature is somewhat lacking. To this end, a number of face to face interviews were conducted with five major insurance companies in Malta, together with several construction firms, varying from micro to large companies, to collect the necessary data on risk and insurance policies, combining a mixture of quantitative questions with more qualitative, open responses. A number of key findings were elicited. Firstly, whereas the majority of construction companies’ believe that there are no differences between the Contractors All Risks (CAR) policies offered domestically, this was contradicted from the interviews carried out with insurance companies. The most common emerging risks are high rise buildings and lack of employees, which underscores a potential gap in contractors’ knowledge in this regard. Nonetheless, micro and small construction companies are generally satisfied with their CAR policies, with claims being a rarity, although for large companies, interviews revealed that they would prefer if certain endorsements are explained in depth to them. Lastly, although there is broad consensus among both construction firms and insurance providers with regards to the risk averse tendencies of contractors within the sphere of Health and Safety, both agree that significant risks are taken in terms of their overall business activities, which may signal the need to broaden the scope of CAR policies in the future, and may in turn also have an indirect impact on Health and Safety risks. These outcomes imply that changes need to be made, firstly to inform policy holders of the benefits, exclusions and conditions of policy and to improve the safety of employees on construction sites. This is to be done not in policy exclusions but through risk management techniques at the workplace. This study can be referenced by the present government, authorities and stakeholders, to make reforms in existing frameworks to adequately regulate breaches in safety conditions in Malta while also mitigating against wider emerging risks within the construction sector as a whole.