Published October 14, 2020 • 3 minute read
1. Failure to identify the real reason for tracking vendor insurance
Q: Why track insurance in the first place?
A: To transfer loss. Every other answer is an accessory to this one.
Loss may transfer successfully when:
- Your legal and/or risk management department(s) create and execute contracts containing the terms and conditions necessary to transfer loss.
- Your vendor’s current insurance coverage contains the policies and endorsements that the contract dictates.
Most self-service COI tracking solutions don’t help with items one or two. Instead, they scan and store documents, noting expiration dates and deficiencies. Without a detailed understanding of your contract requirements and a process to correct non-compliant COIs, you won’t succeed in transferring loss.
A quality full-service solution will augment your legal and/or risk management department with item one and will take complete responsibility for ensuring item two. For each dollar you spend with such a 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.
2. Overestimating the levels of COI compliance in the current program.
Q: What is your current level of COI compliance?
A: Less than 30%.
A KPMG study indicates that more than 70% of all self-reported vendor data is inaccurate, incomplete, or expired. Our findings performing third-party audits of vendor insurance files reveal even greater levels of disparaging data across all organizations and industries. This means that many of the COIs you have on file will not transfer loss when put to the test. However, that doesn’t necessarily reflect 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.
Coming to grips with your current levels of COI compliance will make you less likely to buy the rhetoric about the ease of implementing automated web-based systems and more likely to probe into the potentially 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 a claim arises.
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.
Many 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 total price is as easy as calculating the expenses associated with the materials and labor. But the cost of the windows takes into account additional elements, such as energy efficiency, reduction in maintenance, tax rebates, guarantees, etc. When they consider all the factors, homeowners may discover that a higher-priced window actually has a lower cost over time due to its superior efficiency, thus increasing its value.
Businesses know the difference, too, but it’s sometimes harder to distinguish between price and cost when purchasing a complex service.
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.
- Technology is great, but nothing takes the place of the trained eye of a dedicated auditor.
- Your account’s human resources will ultimately provide the corrective action (the value) to bring about compliance.
This same principle applies to COI tracking solutions. There are methods that businesses can leverage in order to save on this process. BCS, for instance, has a free COI tracking spreadsheet template. But taking this process in-house does not mean it's free, especially when one takes into consideration the time an internal team must spend in order to manage the task successfully.
To learn even more about what your current solution is costing you and how you can maximize the ROI for your COI tracking activities, BCS also offers an excel-based calculator tool that's free to download.
Hopefully, your legal and/or risk management department(s) created the conditions to transfer loss. If you are confident that this is the case, you’re on the right track, and our self-service solution can help simplify your document tracking. However, you’ll need a hands-on approach to turn that legal protection on paper into something that works in the real world. BCS's full-service solution uses trained human resources to make proactive, outbound phone calls that ensure compliance. Save time and transfer loss by dramatically improving vendor compliance with BCS.