Solutions For Engineering and Construction Projects to succeed -BIC

Botswana Insurance Company has strong business fundamentals that has put the organisation in a leading position to respond to client’s needs and industry trends. With a sound reputation, Botswana Insurance Company Limited (BIC) is the longest serving short term insurance provider in Botswana since its inception in 1975. Botswana Insurance Company has been able to maintain a leading role in the insurance industry in Botswana over the last 45 years by offering a full range of insurance products that are both innovative and flexible. The offered products cater for the various sectors; from individual needs to corporate and parastatals. Customers enjoy a range of access points to BIC including branches in Gaborone, Francistown and Maun; a fully enabled and interactive website, brokers located across Botswana and a direct sales team consisting of 15 trained insurance specialists.

The company is headed by Mr Newton Jazire who joined BIC in the first quarter of 2018 succeeding Mr. Johann Claasen. He summarised his journey thus far by saying, ‘” Over the past two years, the most important focus was to stabilise and energise the team that makes up BIC. As you know, people can make or break a company. It was therefore my priority to build a team of strong and talented team players, which were able to “Delight” our customers on a daily basis. Our financial performance over the last two years demonstrates the confidence our customers and the broader market has in BIC. As the CEO of BIC, it has been a highlight of my career to lead the “Turnaround” strategy for BIC, which has been incredibly successful. The “turnaround” strategy included the successful rebrand of BIC and the associated awareness in the market. Between 2018 and 2019, we grew our premium base almost 6 times that of the local economic growth, confirming our leadership position in the Botswana Insurance Market. My future vision for BIC includes an innovative digitalisation programme that will make it easier for our clients to be serviced by BIC, as well as providing new products and services as part of our quest to “Make Life Better” for our customers, staff and stakeholders.”

The Botswana government has prioritised infrastructure development as a key facilitator of economic growth and diversification. This has resulted in the use of new technological innovations, regulatory changes and the influx of new project delivery methods. The result of all this industry change has necessitated contractors to have access to tailored coverage and specialized resources to meet their unique project needs. Botswana Insurance Company provides flexible, customised, structured and packaged insurance solutions at competitive terms for engineering projects by providing comprehensive covers and services for construction and erection projects. BIC offers engineering solutions for small, medium and large projects such as roads, bridges, tunnels, mines, chemical plants, refineries and any type of power generation plant. Whether you are a general contractor, speciality trade or joint venture/owner/developer, BIC covers your wide range of needs. The experienced Underwriting experts and Brokers with technical competencies and vast insurance experience work closely with clients to conduct risk assessments and surveys to determine the relevant covers required. The policy wordings are tailor-made for each project instead of offering a generic product across all projects. BIC also has a vibrant Claims division that ensures an efficient claims management process.

Engineering covers include:

• Contractors All Risks (CAR) e.g. for infrastructure projects, such as roads, bridges, tunnels, airports, harbours and hydroelectric power stations
• Erection All Risks Insurance (EAR)
• Advanced Loss of Profits Insurance (ALOP)
• Contractors’ Plant and Equipment Insurance (CPE)
• Machinery Breakdown Insurance (MB)
• Loss of Profits following Machinery Breakdown Insurance (MBLOP)
• Deterioration of Stock Insurance (DOS)
• Electronic Equipment Insurance (EEI) 
• Business Interruption following Electronic Equipment Insurance (EEI BI)
• Civil Engineering Completed Risks Insurance (CECR)
• Seamless Project Insurance

When asked on obsoleting of insurance packages related to the engineering sector, the Chief Executive Officer of BIC Mr Newton Jazire stated that BIC will continuously review its product lines in relation to the needs of the Engineering Industry. Rather than remove covers, BIC looks at ways to make them more relevant to the market as to ensure that all the risks faced by Engineers are suitably mitigated through quality insurance solutions.

Insurance is unfortunately a subject that is highly misunderstood in Botswana and in Africa in general. This relates not only to the need for insurance but also the general principles of insurance such as “Indemnity” and “Insurable interest.” The engineering and construction industry however, through a variety of internationally accepted standard contractual documents, has for a long time recognised the need to apportion the risk of the contract site to a particular party, normally the contractor and make one party responsible for the purchase of insurance.

Insurance is also a product that is extremely price sensitive and often little cognisance is taken of the cover specifics in relation to insurance pricing quoted. Some policies may have seemingly attractive terms but the cover may not be comprehensive.  If one considers Contractors All Risks cover, some examples of the differences include:

• Some policies restrict cover to the site only and cover excludes transit, off-site storage and manufacturers premises;
• Lack of additional clauses such as surrounding or employers property, servitude/road reserve indemnity and beneficial occupation;
• Inadequate cover for additional costs and expenses such as professional fees, demolition and removal of property and expediting measures;
• Large deductibles or first amounts payable;
• In respect of road and reticulation contracts, restrictions to the length of unsealed road and open trenches that are covered.

All these factors coupled with large deductibles or first amounts payable can reduce cover to near nothing in case of a big loss.

Many Contractors All Risks covers will automatically provide a provision for escalation in contract price and some even post loss escalation and devaluation of anything between 10 and 30 percent. The policy is then adjusted at expiry on the final contract value. Notwithstanding this, many contracts prepared by engineers and government require the contract sum insured under the policy to be increased, normally by 10 or 15 percent. Some engineers have explained this increase as general escalation whilst others as a need to insure additional professional fees following a loss.

In the former case, where adequate escalation is included there is duplication and unnecessary premium is payable up front. In the latter case it should be pointed out that the contract sum insured presents the cost of the permanent and temporary works as set out in the contract conditions. Professional fees are either covered by a separate item in the policy or under the additional costs and expenses item and not under this main contract sum insured. Any good policy will include as a joint insured, if required by the contract conditions, the architect, land surveyor, quantity surveyor, engineer and any other advisor or consultant.

Contactors, Engineers and Principals are not insurance specialists hence there is a need for closer cooperation with insurance specialists at various times during a contract’s life span.

With respect to Liability Insurance, Botswana is not a particularly litigious nation compared with other parts of the world but liability claims are on the increase both in number and in value. Minimum liability requirements including that of professional indemnity are considered to be extremely low and have increased little over the last 44 years. This is not withstanding the fact that the cost of projects have escalated dramatically over this period.

Professional indemnity cover is insured on an annual or policy period aggregate basis. So potentially, an organisation could exhaust their insurance cover limit following just one incident and then leave themselves exposed to any future misfortune which results in a claim against them. Little heed of this fact appears to be taken by the industry on the basis that “it will never happen to me”!

Consideration, with large contracts, should be given to requiring project specific Professional Indemnity cover with an adequate limit and run off period following the completion of the project.

Nobody can predict exactly what the future has in store but to this end we have a specialist division that is continually developing new products to keep abreast with the evolving needs of both commerce and industry of which engineering, mining and construction forms a part.

The CEO in relation to the future of BIC in terms of Insure Tech said that BIC continuously searches for new types of innovative technology, including AI (Artificial Intelligence), new devices and new integrated software that makes life better for our staff and customers. Its all about the Customer Experience and Cost to Serve, these two factors, alongside the need for business sustainability are the main drivers of innovation. BIC has won a reputation in the Botswana market as an insurer that finds a reason to pay a valid claim, not ways to repudiate it. We want customers to experience the benefits of insuring with BIC, and to be able to “Trust the Bull”.