Published December 20, 2011 • 3 minute read
1. Failure to identify the real reason for tracking vendor insurance.
Q: Why track vendor insurance in the first place? A: To transfer loss. Every other answer is an accessory to this one.
Loss may be succesfully transfered when:
(1) Your legal and/or risk management department(s) create and execute contracts containing the terms and conditions necessary to transfer loss
(2) Your vendor’s current insurance coverage actually contains the policies and endorsements called for in the contract
A good service provider will augment your legal and/or risk management department with item (1) above, and will take complete responsibility for ensuring item (2) above. In fact, for each dollar you spend with such a service provider, you will get back roughly $5 in avoidance of legal liabilities, harm to the organization’s reputation, and lost productivity. That’s a pretty good ROI.
Most COI tracking service providers don’t help with items (1) or (2); instead, they simply scan and store documents, noting expiration dates and deficiencies. Without a detailed understanding of your contract requirements, and a process capable of correcting non-compliant COIs, these service providers will never succeed in helping you transfer loss.
2. Overestimating levels of COI compliance in the current program.
Q: What is your current level of COI compliance? A: Less than 30%.
A recent KPMG study indicates that over 70% of all self-reported vendor data is inaccurate, incomplete, or expired. In fact, as we have performed third-party audits of vendor insurance files, our findings reveal even greater levels of disparaging vendor data in all organizations and across all industries. This means 70% of the COIs you have on file will not transfer loss when put to the test. This statistic is not to be taken personally, as if somehow it reflects poorly on you or your organization. Inaccurate, incomplete, or expired vendor data is the reality for the best-run Fortune 100, non-profit, and privately held organizations.
Come to grips with your current levels of COI compliance and you will be much less likely to buy the rhetoric about the ease of implementing automated web-based systems, and more likely to probe into, what nearly all service providers in our industry consider the uncomfortable territory of corrective measures.
Remember, what you ultimately want is to have a perfected COI on file for every vendor and/or tenant, that will transfer loss away from your organization when, not if a claim is made.
3. Getting hung-up on price rather than the more important factor of cost.
Q: What’s the difference between price and cost?
A: Value over time.
Consumers know that price and cost are two different things. For example, consider the price of replacing single-pane, wood windows with double-pane, vinyl windows. Obtaining the price is as easy as getting a price-tag for the new windows and the labor. But determining the cost of the windows takes other things into consideration; like energy efficiency, reduction in maintenance, tax-rebates, guarantees, etc. When all factors are considered, the home owner may discover that a higher priced window, actually has a lower cost over time due to its superior efficiency, and thus greater value.
Businesses know the difference too, but sometimes that difference is much harder for us to distinguish when purchasing a fairly complex service versus a fairly simple product. Here are a few pointers to keep in mind as you analyze price vs cost: The cloud makes everything easier, but that doesn’t mean you don’t need great people working for you anymore. Technology is great, but nothing takes the place of the trained eye of a dedicated auditor. The human resources used on your account will ultimately provide the corrective action (the value) needed to bring about compliance.
Hopefully your legal and/or risk management department(s) have created the conditions necessary to transfer loss. If you are confident that this is the case, you are on the right track; however, in order to turn that legal protection on paper into something that works in the real world, you will need a hands-on approach to reach compliance. BCS uses trained human resources to make proactive, outbound phone calls that ensure compliance. Don’t just outsource your process to save time. Save time and transfer loss by dramatically improving vendor compliance with BCS. For more information about BCS, visit our website or call us today!
The Protection You Need, A Process You Can Trust, Accuracy You Can Depend On.