Service quality of insurance in complex project deals in the construction industry in Ghana

PurposeThe insurance sector provides insurance protection for complex project deals in Ghana. The study assesses the service quality of insurance of complex project deals in the construction industry of developing countries, specifically Ghana. The objectives are to identify the insurance typologies in complex project deals in the construction industry, to assess the level of construction insurance quality, and to assess the challenges faced in complex project insurance.Design/methodology/approachA comprehensive literature review was conducted to analyze the previously related works on insurance in the construction industry. The study then adopted quantitative research strategy where a structured questionnaire survey was used to collect information from construction industry professionals. The data analysis was organized in accordance with the specific objectives of the study with the aid of mean score analysis and independent sample t-test. The study again measured the reliability of the adopted scale using Cronbach's alpha, which indicated that all the items reliably measured what they were intended to measure, and thereby, statistical tools can be applied to give in-depth meanings.FindingsThe insurance typologies for complex projects were discovered by the study, as well as the available service qualities of insurance. The study again made it clear that the major challenges capable of affecting complex construction project are low quality of insurance companies' services and the gap in statutory and legal systems.Research limitation/implicationsThe major constraint in this study was the issue of taking only Ghana as a developing country to generalize the result. This is then to provide lessons for other developing countries.Practical implicationThe findings from this study will be useful to construction firms, insurance firms, and regulatory bodies by identifying the effectiveness of insurance as a risk mitigation measure in construction. The study will help the insurance firms to better position themselves to meet the demands of the construction industry. As the findings of this study are Ghana-specific, it is also to provide lessons for other developing countries.Originality/valueThis study delves deep into the complex construction project insurance service quality in developing countries, specifically Ghana.

6 Insurance

This chapter discusses the importance of project insurance. Financiers take an onerous approach to insurance in project finance transactions, requiring a comparably more robust insurance programme than would be adopted in a project that is financed on balance sheet alone. This reflects the fact that until the project company has established a reliable revenue stream, it will have a low level of capitalization and be highly leveraged. The primary function of insurance is to act as a risk transfer mechanism. In return for a known cost (the premium) the uncertainty associated with both the frequency and severity of loss is transferred to the insurer. The discussions cover insurance programme design, project company control, the breadth and scope of the insurance programme, legal and commercial influences on procurement, and insurance risk itself and lenders’ clauses.

7 Insurance

This chapter considers the approach taken by financiers to insurance in project finance transactions. Itfocuses onthe types of insurances that lenders will require (such as material loss insurance, consequential loss insurance, and liability insurance),why financiers typically require insurance to be procured and controlled by the project company, and how commercial influences such as the creditworthiness of the insurers and re-insurance requirements impact upon a project finance insurance programme.In addition to examining general insurance law principles (such as full value coverage and the treatment of force majeure), this chapter also considers the provisions that are customarily endorsed on project insurance policies for the benefit of the lenders (such as a broker’s letter of undertaking).