Published October 05, 2018 • 2 minute read
Consider these critical components for insurance certificate tracking and monitoring for compliance:
Why do I need to collect certificates of insurance from my suppliers?
A certificate of insurance is a document that provides evidence that the insured party (i.e. vendor, contract, supplier, manufacturer or tenant) has certain types of insurance coverage and limits enforced on the day the certificate was issued. Certificates are important for a number of reasons:
- They help confirm a vendor/tenant is compliant with contractual insurance requirements.
- They make it easier for the claims representatives and legal counsel to complete the claims adjustment process when damage or loss does occur.
- If your insurers perform audits, having proof that your vendors and/or contractors maintain their own insurance will minimize your own insurance cost.
- Perhaps most importantly, having a process in place will help protect you against potentially millions of dollars in damage claims filed every year.
When do I ask for certificates?
Certificates should be requested once the insurance language in a contract/lease has been agreed to by the parties to the agreement. If there is no contract in place or a contract is already in place, then certificates should be requested immediately.
How long do I keep certificates?
It depends on the nature of your organization and where you are located, but in general, certificates should be retained for a minimum of five years.
What makes for a good certificate collection and tracking process?
This can vary depending on the number of certificates your organization handles, but, in general, the collection and tracking process should:
- Be articulated in writing
- Have support from senior management (e.g., CFO, risk manager, etc.)
- Have clear lines of authority spelled out for collection, compliance review, and acceptance and monitoring of certificates, including exceptions
- Provide a clear documentation trail for each certificate, including corrective actions
- Allow for regular review, update and audit of the process, with a mechanism for continuous improvement
Who should collect certificates?
Sufficient knowledge and experience are critical to achieving the intended purpose of COI tracking. The process requires experts who can review contracts, understand the insurance language found in contracts, and determine how to translate that information to insurance coverage being evidenced on insurance certificates.
Given the widespread differences in the types of insurance certificates issued and the fact that much of the information reflected on certificates tends to be of poor quality, it’s imperative that organizations and those responsible for gathering, verifying, and monitoring certificates have a well-defined process in place that achieves insurance compliance and not just paper tracking.
If you would like more information on complete and accurate insurance collection, verification and monitoring, download the guide: 9 Fundamentals of Vendor Insurance Review, or schedule a demo.