Published May 12, 2020 • 3 minute read
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.
- Having proof that your vendors and/or contractors maintain their own insurance will minimize your own insurance cost if your insurers perform audits.
- 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?
This depends on the nature of your organization and where you are located. A general rule of thumb, however, is to retain your certificates for a minimum of five years to achieve reasonable confidence that they will be accessible if needed in the future.
What makes for a good certificate collection and tracking process?
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.
What this process actually looks like can vary depending on the number of certificates your organization handles, but, in general, the collection and tracking process should:
- Be articulated in language
- 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
- Be supported by COI tracking software or other tools
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.
As such, your organization should designate a specific person who has the necessary knowledge to serve as a designated person. This should likely be someone who is already involved in the management of the organization's compliance and/or insurance activities.
Alternatively, you can also choose to outsource these tasks to a certificate of insurance tracking company.
How do I manage all of this documentation?
Managing certificates of insurance can be done in one of two ways: in-house, or through outsourced certificate of insurance tracking solutions.
Tracking certificates of insurance in-house is a manageable job when a company is small and working with a limited number of third parties such as vendors. This, however, still requires the right tools to make sure that it's being done in an organized fashion and avoid errors. For this, a well thought-out template can be an invaluable asset to your team.
As a company grows, however, an in-house solution may be unable to scale with it. In order to maintain the level of organization needed to ensure continued compliance even as your company works with increasingly more vendors, contractors, tenants and more, consider enlisting the help of a certificate of insurance tracking solution.
The right solution can provide the perfect balance of software and service, you'll need to know what to look for and what questions to ask in order to find the best company for your business.