We gave ChatGPT the following prompt:

Explain why ‘principal controlled’ construction insurance cover is better than relying on the contractor’s insurance.

Here’s what it said:

While both principal controlled construction insurance and relying solely on the contractor’s insurance have their merits, the former is generally considered the better option, particularly in worst-case scenarios such as building defects, major material delays or construction company collapse.

Firstly, principal controlled construction insurance provides an extra layer of protection for the project owner, giving you greater peace of mind. In the unfortunate event of a worst-case scenario like a major construction defect, the principal controlled insurance can step in to cover the costs of fixing the issue without burdening you financially. Relying solely on the contractor’s insurance, which might have limits or exclusions, could leave you exposed to significant financial risk.

In Australia, where we’ve witnessed various construction challenges, such as unexpected collapses, regulatory compliance issues, or even severe weather events like storms and floods, having principal controlled construction insurance can provide financial comfort to your organisation. It ensures that you have dedicated coverage tailored to your specific needs, providing a safety net in case things go awry during the construction process.

Furthermore, principal controlled construction insurance offers you greater control over the claims process. You have a direct relationship with the insurer, enabling you to actively manage any potential claims and ensure that they are handled efficiently. On the other hand, relying solely on the contractor’s insurance might involve additional complexities and delays, as you would need to communicate and coordinate with the contractor to initiate and pursue a claim on your behalf.

In the Australian context, where construction regulations can be quite stringent, principal controlled construction insurance may also help you meet legal requirements more effectively. It ensures that you have the necessary coverage in place, which can be particularly important when dealing with government or regulatory bodies. By having control over your own insurance, you can be confident that you have met all the necessary obligations and can avoid any potential penalties or legal complications that may arise due to inadequate coverage.

Ultimately, principal controlled construction insurance is a proactive approach that allows you to protect your interests comprehensively. It offers you peace of mind, control over the claims process, and a safety net in the face of worst-case scenarios. By taking the initiative to secure your own coverage, you can mitigate risks effectively and ensure a smoother construction journey.

This is our response:

ChatGPT got it 100% correct and adequately outlined the key considerations for principal controlled insurance versus contractor’s insurance, namely:

• Reduces exposure to significant financial risk.
• Coverage may be tailored for your specific needs.
• Greater control over the claims process.
• Meet regulatory obligations for specific types of projects.

Of course, ChatGPT cannot provide personalised assistance to help you arrange cover for your specific circumstances. So, we strongly urge your organisation to start any construction journey with RMS on board from the design stage. We’re here to help you protect your financial investment in the event something goes wrong. If you have more questions or you’re about to start a construction project, please give us a call or drop us an email.