Texas Prima CTrax Presentation

Michael:” Hi everyone my name is Michael del Fierro I’m the national account executive here at JDI data and I’m joined here by my co-presenter Martha from the port of Corpus Christi. “

Martha:” Hello.” 

Michael:” So today we’re here to talk about tracking Certificates of Insurance, if you’re attending this webinar tracking COIs is probably important to you and your organization. We’ll be going over some COI basics as well as taking a look at how the port of Corpus Christi implemented a system to streamline their process and what can you be doing next.

We all know that the majority of certificates are not contracts, so there’s no need to be overly concerned about the accuracy and wording on the certificate, right? Well, not according to E&O statistics. During the past year of data collection errors in admission claims involving a certificate of insurance have increased 28%, about 1 in 25 E&O claims involves a certificate of insurance with over half of all claims arising from an error or omission by a CSR, a customer service representative.

About 75% of E&O claims for certificates involve a CGL policy a commercial general liability policy, with the next highest category being workers compensation at 10%.  There are two main sources of certificate E&O claims. One, failure to add or improperly identifying additional insurance, that’s at 36%, you’ll see here on the pie. Next, number two is misrepresenting coverage on the certificate that doesn’t actually exist, that comes in about 21%. CSRs are primarily accused of being responsible for the former and producers for the latter. And you see here 43% makes up the other part of this pie, so why does this occur?

Well, agents often fall into a routine with policyholders that frequently require certificates, in these situations the agent can become lacks in checking to make sure that the coverage hasn’t changed. E&O claims can arise from certificates issued on policies that have lapsed. Claims can also arise from certificates that indicate a specific type of coverage is in place when in fact the insured recently dropped it. These problems may be more prevalent in larger agencies where the personnel issuing certificates are different from those making policy changes.

In one recent case, the agent placed a CGL policy for a contractor that had successfully bid a project with the federal government. The agent issued a certificate to the government reflecting coverages as of a certain date. Shortly thereafter the contractor allowed its coverage to lapse due to non-payment of premium. Subsequently, the contractor negligently caused damage to government property. The government sued the agent for failing to advise of the cancellation.
That leads us to our introduction and if we start where tracking and managing a COI comes into picture when managing third-party risk. It’s usually during due diligence or the contracting phase and that’s it.

We’ve learned typically that’s where we’ve seen the process break down. These silos create less transparency and more questions than answers. So why does this happen? Well, relationships between the organization and third-party service providers are commonly decentralized and typically formed on an ad hoc as-needed basis. Individual departments outsource for a specific purpose with little participation or input from others in the organization. This siloed approach can lead to the underutilization of the service offering by other business units who might otherwise benefit. In the end, you end up effectively overpaying through lost opportunity costs, worse, your ability to govern the relationship, manage the risk and enforce compliance is severely compromised.

Martha, I think you might have an example of that, where you were explaining to me about some contractors you were working with and didn’t realize they were on, they didn’t have the proper insurance. “

Martha:” Right, before we implemented CTrax we were getting COIs from contractors towards the end of the project, we weren’t able to keep track with everybody when we had the projects or the contracts and we realized that the contractors were non-compliant. A lot of our contracts are sometimes 30-90 days so we didn’t have enough time to gather all the information and like I said we would use the database or spreadsheets to keep track of everything and by the time we got the compliance COI the project was already ended. So we were lucky in that aspect. “

Michael:” Yeah. And this lack of enterprise-wide focus highlights the need to develop internal organizational structures to both better leverage the potential hidden benefits of the third-party services across the enterprise and obviously to properly manage the risk present in any external relationship.

So in today’s presentation, we’ll take a look at how tracking coverages on a certificate of liability insurance will help protect your organization from an uninsured or underinsured short loss. We’ll also take a look at opportunities in the COI journey where you can immediately close gaps in how you’re collecting, reviewing, and following up on COIs ensuring you’re effectively transferring the risk to your third-party providers. So here in the next slide, we’ll dive a little deeper into some of the things we’ve learned from a siloed approach to a more collaborative approach. So risk, procurement, legal and other departments must come together to establish a well-defined process that’s augmented with a centralized database, promoting transparency and collaboration amongst departments so that your team can effectively track and manage these third-party relationships. This type of holistic approach ensures more than just compliance it ensures you’re transferring that risk in those third-party contracts. Here are some key steps to take during the initial phases of the relationship, analyzing the vendor contract, making sure that the contracts contain proper language to protect your organization, carefully reviewing the scope of work with legal, and considering things that could go wrong. Having your legal counsel include a strong indemnity agreement in your contracts. Number two, choosing the appropriate insurance requirements based on the scope of work. It’s important to select the proper type of insurance and insufficient amounts to protect against a potential loss. Sharing them with the contractor early in the bidding process saves time by eliminating contractors for consideration who may be unwilling to agree to your requirements. Finally, of course, verifying the coverage. Requesting the contractor to provide a COI and all the appropriate endorsements such as additional insured or waiver subrogation and reviewing them for completeness and accuracy and this is where our focus will be today.

So here is an image of a sample certificate. Certificates are simply snapshots of basic policy coverages and limits at the time of the issuance of the certificate. It can be argued that other than the exact day on which you are obtaining your proof, you can never know with ironclad certainty whether or not the name insured still has the coverages you requested but you need to get the COI, sounds pretty obvious right? But you’d be surprised how often the COI is not requested before a project starts. It is your reference document for everything else, it points you to the insured’s broker, the carrier’s policy dates and terms, and limits of the coverage. Contains a wealth of information and you need to get it as soon as possible. In some cases, you may want to request a declaration page of the policy. Here you’ll get a summary listing of all the parts of the insurance policy. Much of this will be found on the COI but some will not. The big difference here is you’re getting it from the insurance carrier, a fact of assurance not lost on prudent risk managers.
Applicable endorsements, short of getting a copy of the insured’s entire policy. The endorsements are your best proof of critical issues such as additional insured status, notice of cancellation, waiver of subrogation, primary and noncontributory, and completed operations.

 Alright, so keeping the original statistics in mind, here’s where you can ensure the information on the COI is accurate. Remember 1/25 E&O claims involves a certificate of insurance with over half of all claims arising from an error or omission by CSR. Remember those statistics from the previous slide? About 75% of E&O claims for certificates involve the CGL policy with the next highest being worker’s compensation. So how can we prevent these types of claims from occurring? Well, making sure you’re reviewing the following information on the incoming COIs is a great start. Number one you want to check for the date in the upper right-hand corner of the COI, is it today’s date?

Check to make sure the named insured matches the name on the contract, check to make sure that each coverage has a carrier indicated. Being extra prudent, you may want to even check the AM best ratings for each carrier.

Are the coverages you requested shown on the COI? Is there a policy number for the coverage? Without this information, you have nothing to reference. Also, make sure that effective dates are current. Check the policy limits to make sure that they meet the minimum requirements. In some cases, you may accept an umbrella policy for any deficiencies and other coverage limits. Also if you ask for specific language in a description of operation box such as an AI endorsement, does it appear there as you requested? And finally, make sure that the certificate holder has your organization’s accurate name and address. So as you can see, that’s a lot of steps that go into checking a COI. It can take anywhere from 10 to 25 minutes to properly check a COI for accuracy and incompleteness. Today we’ll show you how others have automated much of this process, essentially eliminating the administrative burden required to track and manage COIs. Eliminating a lot of the manual and error-prone mistakes which we’ve seen. That can be really costly to an organization and really takes up your time and resources. Providing you put in the time and effort like the port of Corpus Christi did. You get pretty close to transferring as much risk as possible while increasing compliance. So to provide a little bit more clarity on these steps we’re going to go explore a real-life example with Martha at the port who has been in your seat and she’ll go over how they’ve transitioned from a paper-intensive process to a more centralized database and some of the benefits they’ve realized by taking advantage of this newer technology to automate much of the COI process. “

Martha:” Thank you, Michael. So before implementing the new system we would receive hundreds of random COIs via mail. It was challenging to determine what contacts the COIs were associated with and whether they were still needed. We were using spreadsheets and manual data entry, requiring a lot of time to manage hundreds of incoming COIs, which led to things slipping through the crack as I mentioned earlier, and leaving us underinsured and vulnerable against liabilities. An analysis was performed on the volume of active contracts that included the leases professional services consultant, service contracts, etc. With the certificate of insurance or COI associated with them within each department, so each policy or each insurance policy listed on the COI potentially had different expiration dates and each contract can require between 4 and 10 different insurance requirements. The results were crystal clear that we needed some help. It was determined an electronic COI management database was required. Our current process now is to assign a risk profile to an existing and new contract in the system.

Before the project begins we ask our contractors to respond to the system-generated email requesting proof of insurance. Contractors respond by using a smart link generated by the email system which allows them to submit their COI through a portal, automatically attaching the COI to the project and creating an alert for us to review any deficiencies. Coverage expiration dates attract in the system generating auto email reminders requesting a renewal COI from our contractors. The system offers dashboards and reports to monitor and manage compliance to all our projects and contractors. So since implementing the new process, we’ve seen a significant decrease in excess COIs being mailed. We created transparency and increased collaboration with internal stakeholders such as engineering, real estate, environmental compliance, and legal. As I mentioned previously, we were not involved early in the bidding process and now we are. 

Projects are not started without an insurance review and approval from our department. Automated emails are delivered automatically to stakeholders weekly showing statistical data to track various trends. Aside from seeing our compliance percentage increase from the low 60s to mid-80s. Other benefits we’ve discovered are having an optical character recognition or OCR engine that scans and reads incoming COIs capturing the data and then automatically organizing the database. Having email notices sent out automatically to contractors to remind them of upcoming renewals. A digital library for fast and easy retrieval of COIs and other compliance-related documents. The ability to grant access to various departments with individual access controls and rights. Finally having a cloud-based system allows us to access information from anywhere and at any time. So even though we have an automated COI system in place we’re still receiving mail in COIs from companies we do not have projects with. We’re talking with CTrax about possibly taking that task over. We are also able to track projects whose companies are self-insured, we can enter the project to CTrax instead of annual reviews for financial evaluations of the company. We created a Financial Review form, which is forwarded to our accounting department for that purpose. “

Michael:” Oh, that’s great. Thank you, Martha.

So in addition to going paperless, the port leverages newer technology to assist them in evaluating and following up on COIs, which obviously is resulting in a tremendous benefit to the organization and protecting the port.

I want to share some eye-opening statistics that I found doing quick research. So a 4 drawer filing cabinet costs about $25’000 to fill. 25’000, that’s not inexpensive and $2’000 a year to maintain. American companies spend an estimated $20 on labor costs to file a document, $120 on finding a misfiled document, and $220 to reproduce a lost document. A typical company can cut its paper consumption by 25% by increasing the use of email, online forms and reports. Even double-sided copying and lightweight paper. These statistics can be found on the web and are really another benefit of going into a more modern system. So aside from using a modern system and process to help mitigate the risk involving third parties. Other notable best practices I wanted to share with the group here are when analyzing risk and determining the proper type of amount of insurance to request proof of, don’t fall into the trap of not paying sufficient attention to small jobs.

There is no correlation between the size of a project and the degree of risk, even the smallest job can be potentially catastrophic. Setting up a standard set of risk profiles based on the types of services or products really can help you in this regard. Not only for consistency but it will streamline that process so you don’t overlook those smaller projects. It also creates less confusion and delays with your vendors. Also, don’t be afraid to ask your broker in advance of awarding the contract for some help. If you’re not sure about certain conditions of a statement of work SOW in a contract or about a specific coverage or endorsement on the COI don’t be afraid to ask your broker. The recommendation here is to work in a collaborative environment with your broker, legal counsel to review the contract SOWs and COIs in case you have any questions.

The other insurance clause. Well here we’re getting a little bit technical but this provision of the insurance policy will spell out how a loss will be apportioned among insurers when more than one policy covers the same loss. 

The risk here is that some policies provide no coverage when other insurance is in place, some pay a pro-rate of share and others apply in excess. You might not know if you don’t ask. And obviously, it goes without saying you need to report claims promptly, inform the other parties’ insurer immediately in writing of any incidents or claims arising out of the work. Send a copy to the contractor and their insurance agent. It’s a good idea to inform your agent as well, and insurance companies to protect your rights under the policy.

So what’s next? Well if you’re stuck spending too much time managing COIs manually and dealing with a lot of paper there is a huge opportunity to gain efficiency and streamline. These key questions can help determine if using a third-party service provider is the right fit for your organization. Analyzing the who and the how, I want to share some important questions you might wanna ask yourselves internally when you go back to your organization. So who’s responsible for evaluating COIs before the project starts? Is it one person? Is it multiple people? Is it spread across multiple departments? Figure that question out first then how much time does it take to evaluate a COI, to make sure that is compliant with the minimum insurance requirements defined in the contract. Next, who’s responsible for following up on renewals?

We’ve learned that the renewal process leaves a lot to be desired, there’s a huge opportunity there to making sure that the vendors, your contracts remain compliant and are keeping that insurance that they showed you proof of early on, is still in force.

Next, how are incoming COIs being tracked and managed? Are you using the system, are you using some document management system, maybe a procurement system? Figure that out, see if there’s any opportunity to streamline more of the process and how many active projects are you tracking annually? How many certificates do you receive each day? These are some of the questions you might wanna ask yourself when you’re doing an internal analysis. Alright so next, if you do determine to interview potential providers here are some questions I wanted to share with you in our experience that are important.

Get to know the company you’re interviewing, goes without saying but you really want to know about the company in general, their vision, and strategic goals for the software or their solution. How committed are they to their offering, how do they treat their customers, do customers have a voice in the road map of the offering, ask also about how they support their offering and is support provided by email, phone or both or by other means. Some vendors may charge extra for phone support so be cautious. Do they have an SLA that they abide by a service level agreement to respond to requests issues in a timely manner? Is the support U.S based? Different geographic locations may present some challenges.  What is their pricing based on? Is it based on per COI transaction, is it based on user, are they charging you extra for storage, is it all-inclusive, or is it a la carte? And finally what is their termination policy? You know, is there a fee to get your data back?

So it’s important no matter the size of the agency, that procedures be in place. That requires your staff to confirm all coverages before allowing the name insured to start working on the project. Remember to not fall into the trap of not paying sufficient attention to small jobs, there’s no correlation between the size of a project and the degree of risk, even the smallest job can be potentially catastrophic. Properly checking before the project starts and continuing to monitor those contractor’s insurance requirements before you allow them to start working on the project, is really important. And investing in a modern software or outsourcing might make sense once you begin researching providers and analyzing requirements 

We’ve got our contact information up here. If you want to reach out to myself or Martha to get some more details about their experiences with going into a more modern system, please feel free to reach out to us. We’re happy to answer any questions that you might have. We appreciate your time today and thank you for attending this webinar. “

Martha:” Thank you! “