The Hidden Costs of Issuing Certificates of Insurance

Certificates of insurance (COIs) serve as essential proof of insurance coverage for third parties, ensuring policyholders meet contractual obligations with clients, vendors, landlords, or contractors. However, it's crucial for brokers and agents to be fully aware of the hidden costs associated with issuing COIs.

Administrative Overhead:

Issuing COIs involves significant administrative burdens. Agencies must allocate resources to handle COI requests, review policies, conduct contract assessments, liaise with insurers, and ensure compliance with specific insurance requirements. This labor-intensive process results in increased administrative expenses that can accumulate over time, even if they aren't immediately apparent.

Insurance Premiums and Deductibles:

Mistakes on COIs can result in E&O claims against your agency. While your agency may have E&O insurance, that policy likely has a substantial deductible. Apart from the cost of the deductible, years of future premiums can be impacted by even one claim, let alone multiple ones. Furthermore, issuing COIs can trigger a need for adjustments to policy terms, potentially resulting in higher premiums. These hidden costs can have a significant impact on your agency's profitability, especially for those that frequently issue COIs/EOPs.

Coverage Limits and Additional Insureds:

COIs often include specific coverage types, limits, clauses, and additional insured parties based on the requesting party's requirements. To fulfill these insurance requirements, it often requires multiple additional insured endorsements like for ongoing operations, completed operations, and non-privity of contract. Agencies must ensure the coverage terms meet the third party's needs, which may require recommending the purchase of higher coverage limits or additional endorsements from the insurer. Failing to do so exposes your agency to liability, even if the requesting party accepts the COI.

Legal and Compliance Risks:

Inaccurate or non-compliant COIs can subject your customers to legal and compliance risks. Incorrect information on the certificate may result in legal consequences or contractual disputes, leading to significant legal fees. Non-compliance with insurance requirements can damage business opportunities, relationships, or even result in breach of contract claims, underscoring the importance of accuracy and compliance.

Training and Technology:

Effective COI management often demands investments in training and technology. Without the aid of technology, employees handling COIs need significant knowledge about insurance policies, coverage types, and contractual insurance requirements.

By recognizing these hidden costs, your agency can assess whether implementing technology solutions, such as Certificate Hero, can reduce your expenses and help mitigate the risks associated with COI issuance. While it can be said that investment in technology can represent a new cost, it is proven that they ultimately lead to better operations and customer satisfaction over the long term.

Consider reaching out for a demo today to explore how Certificate Hero can help manage the complexities of COIs more efficiently for your agency.