|
Quality Assurance Can Reduce Liability Insurance Costs
Builders, trade contractors and design professionals are adopting quality assurance plans to help ease the burden of the rising cost and declining availability of general liability insurance, according to Quality Matters, the e-newsletter of the National Housing Quality Program.
A copy of a documented quality assurance plan can show an insurance carrier the steps that a builder has taken to reduce risk. The plan should demonstrate exactly how each aspect of the system operates, and how the company minimizes the risk of defect lawsuits and claims of poor workmanship and improperly installed products, materials and equipment.
“Document everything,” advises Mike McMichael, senior risk consultant for Zurich Services Corporation, one of the largest construction industry insurance brokers in the country.
“Particularly for smaller builders, documentation is one of the most important things that can be used down the road to demonstrate consistency, sophistication, responsibility and a proactive approach to quality,” he says. Insurance carriers look closely at management practices to assess risk, and according to McMichael, a company’s quality assurance program, or its failure to have one, is a telling indicator of how the business is managed.
When discussing their plans with insurance carriers, builders should keep in mind that quality control is not the same as quality assurance. Insurance carriers are looking for consistency, and quality control can be perceived as a reactive and inconsistent method for delivering results.
To present a compelling argument for lower insurance rates, builders should bring the following talking points to the negotiating table in their discussion of their quality assurance system:
- Company standards are defined by comprehensive specs and reflected in scopes of work for all key trades.
- Personnel understand and comply with applicable industry codes and regulations.
- Qualified staff members and trades are certified through training and ongoing evaluation.
- Inspection procedures are defined and lead to an effective continuous improvement process to eliminate recurring errors.
- Personnel re-inspect and document the correction of all identified non-conformance with the quality system.
- Integrated and effective job site safety programs are used for all projects.
- Each crew member follows product installation instructions.
- Results are verified through third-party inspections.
- Documentation is available to prove all of these points, and records are kept in an accessible and safe location for at least 10 years.
There are strong indications that more widespread use by builders and trades of well-documented quality assurance programs that include regular training of job site personnel and a focus on continuous improvement can help to reduce costs, according to Quality Matters.
Objective, third-party verification of quality management practices is another compelling selling point for reduced premiums.
Builders who don’t have a fully-documented, systematic program for quality assurance in place should consider participating in third-party certification such as the National Housing Quality (NHQ) program.
For more information and a list of companies offering discounted construction general libability insurance to builders who meet specific criteria, e-mail Don Carr, NHQ Certified Builder program manager at the NAHB Research Center.
|
