Businesses need to prove to their counterparties (customers, vendors, subcontractors, landlords, banks, leasing companies, etc.) that they have the insurance coverages these parties require. Typically, the insurance broker that sold the insurance creates the industry standard ACORD certificate that evidences the requested coverages. If there’s a claim and the insurance policy wasn’t structured correctly with required coverages, there is likely going to be negative financial ramifications for one or more of the parties. The counterparty, the policyholder, the insurer, and the broker all want it done correctly but it remains one of the leading sources of professional liability claims against insurance brokers. Counterparties and policyholders don’t want the additional burden of suing the broker who issued the certificate when the insurance doesn’t respond as everyone thought it would. In response, an industry for COI tracking and coverage compliance was born. It’s easy to see how COI Tracking and Automated Insurance Verification tools can be helpful for certificate holders, but how do they help commercial insurance brokers that issue them?
Unfortunately, they don’t. Instead, they make the process of certificate issuance more time consuming and laden with liability. Ask any certificate processor how many revisions it takes to get these human augmented automated tracking services to accept the COI and how many times they’ve just added to the description of operations what the firm asked for without amending the policy. Sometimes the COI tracking service seeks terms on the certificate that the signed contract doesn’t explicitly require.
Certificates when issued correctly are just a snapshot in time of what the policyholder has for insurance. To be clear, the certificate does not amend or alter the insurance policy(s). Nor do they confer rights to the certificate holder, additional insureds, or loss payees. Even if the policyholder has the correct coverage terms (e.g., primary/non-contributory), if the contract doesn’t require them, the certificate holder won’t be entitled to them. For a certificate of insurance to be issued correctly, the processor must take into consideration what the contract between the policyholder and counterparty requires and the coverage terms the current insurance policies afford.
As most commercial insurance brokers have experienced, by the time their insureds request a certificate and provide the insurance obligations, the contract has already been executed. As such, the task is about compliance, not negotiation, which in turn is a selling opportunity for the agency.
Unless your agency enjoys reissuing certificates multiple times, it only makes sense to do the review when the COI is being created rather than after it’s been issued. While easily said, it’s not easily accomplished as most contracts are drafted by lawyers, but most certificates are issued by those without legal training and in some instances with little or no insurance expertise.
So, from the insurance broker’s perspective, accurate certificates are good, but policy language that complies with the contract is king. Certificate Hero’s AMS agnostic, AI/ML driven contract review technology can help your agency improve certificate accuracy, increase processing efficiency, enhance account profitability as well as to provide analytics for actionable improvement.
Certificate Hero can help you simplify your certificate issuance to save you time and labor while minimizing the risk of errors and omissions. Reach out today to learn more!