What is a Certificate of Insurance?

Jenna:” Hey, it’s Jenna. And I’m here with JDi, and I’m speaking here with James De Rosa. Hi, James, how are you doing today? ” 

James:” Jenna, thanks very much for having me, I’m doing great. “

Jenna:” Awesome. Well, today we’re gonna talk a little bit about certificates of insurance, and how to be careful when you’re processing these documents to avoid any fraudulent documents. Could you talk to us a little bit about that process? “

James:” Sure. A certificate of insurance is really not an insurance policy, it’s just a certificate representing that you have insurance. And there are a number of forms that are available in the industry and some of the insurance carriers actually send out a letterhead that verifies coverage. So it’s not the certificate of the insurance being fake, it’s the content within the certificate. So what we recommend is not just taking the certificate of insurance and using that as the verification of the policy, but we suggest that you at least call the broker and make sure that the policy is in fact in force. We would like to see a follow-up with the insurance carrier to be sure that AM best is qualifying them correctly, and they have financial stability. And more importantly, is the endorsements like the additional insured endorsements and the wavier of subrogation endorsements and there are so many areas that are above and beyond what a certificate of insurance actually shows you. ” 

So in accumulating a group of certificates, it is really important to be sure that you have a follow-up process in place because if you don’t you could end up having an insurance policy that is really not enforced. So for example I’m a contractor, right? And you say, Jim, you can’t work for me unless you have insurance. So I go out and I call my broker and I get a binder and a certificate of insurance. And I end up with that, and you hire me, and I get my first paycheck, and I cancel my insurance policy. How do you know that?”

Jenna:” I wouldn’t know that. That’s the problem I guess. “

James:” Exactly. So again it is very important for me to emphasize, it’s not the certificate of insurance that I want you to be concerned about. When you talk about the fake, it’s the follow-up process to ensuring that the certificate does work, and everything that is represented is actually true.”

Jenna:” Right. And you know a lot of people are realizing that you know, tracking your C.O.I is with paper, that manual process is getting more and more, it’s having more and more issues with compliance because you know, you don’t have that follow up process, these certifications of insurance end up in binders and bins across the organizations. So a lot of people are moving to solutions that are, you know, digitized like Ctrax. “

James:” Actually there are other things that you can do to ensure that the certificate is valid. You can ask for a deck page which is primarily the first page of the insurance policy and it outlines all the coverages, you can ask for the endorsements and the exclusions also because there are many things that are excluded from policy coverage that you might not know. Each insurer has its own requirements and underwriting process. So there’s really no straightforward processing that you can apply.  You have to verify each one. “

Jenna:” Okay. Well, that makes a lot of sense, and you’ve been in this industry a long time so you understand exactly those little pitfalls that you have to look out for.”

James:” Yeah. Well, compliance is what it’s all about. “

Jenna:” Right. “

James: “And in today’s times we have to be safe because the digital size side of it is also something you brought up earlier night and I wanted to talk a little bit about the digital side of that. Because when you go out and buy a car or you get a mortgage on your home, you are automatically adding your finance company to the policy of your last payment, right. So if your policy was ever canceled or if there was anything fraudulent, they would automatically get notified. But unfortunately, that technology has not yet come to our industry where we’re tracking general liability and other components of insurance that don’t have that infrastructure built in. So the things that we’re constantly trying to work on are the communications with the brokers so that we can be electronically notified in the event there’s something wrong with the certificate.”

Jenna: Oh, that’s great. That’s really, really great and I appreciate all your insight into this Jim. Thanks for spending time with us today. And hey, if you have any other questions about tracking C.O.I make sure you reach out to the JDi experts. We’ll be happy to schedule you with a demo for Ctrax or answer any more of your questions. Thanks for tuning in guys.”

James: “Thanks for having me.”