This paper looks at the extent of insurance policies in terms of efficacy in serving the intended purposes, and risk management in the Sri Lankan construction industry.

The construction industry is plagued by risk and too often this risk is not dispensed to best of satisfaction. Majority of construction practitioners therefore consider insurance as a risk management strategy for more serious loss exposures. On this note, understanding the extent of insurance policies in terms of efficacy in serving the intended purposes, and risk management in the Sri Lankan construction industry is important.

Semi structured interviews were conducted among eight construction professionals and three insurance firms in order to investigate the most significant insurance policies practised in the Sri Lankan construction industry, significant factors affecting the efficiency of those policies and barriers encountered in effective use of those policies. Subsequently a document survey was carried out on recently completed 13 projects which consist of 63 contractor’s all risk (CAR) policy claims, 49 public liability claims and 28 employer’s liability claims with the intention of inspect the efficacy of those policies.

Research findings confirm that Employer’s liability insurance, public liability insurance and CAR are frequently used in the Sri Lankan construction industry. Insurance claims data indicates that the percentage of settlement of CAR policy claims and public liability claims were lesser than the rejection and under settlement of claims. In case of employer’s liability insurance, percentage of settlement was higher than the percentage of rejection. The wording of the policies and endorsements, quality of insurance company’s service and cooperation between insurance firms and insured were the significant factors which affecting the effectiveness of insurance policies. Barriers to effectiveness of insurance were identified as improper implementation of safety procedures, poor safety measures, lack of knowledge of insurers and the like.



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