How to Manage Your Commercial Construction COIs
Time is money for commercial construction contractors. If your crews aren’t on the job site raising walls and finishing off projects, you’re not succeeding as a business. That goes for the back office as well: A commercial construction contractor relies on straightforward, accurate processes to protect the organization. Unfortunately, one of the most important processes can turn into a time sinkhole: managing certificates of insurance.
For many construction companies, managing COIs is a complicated venture. “Construction is one of the more challenging industries to manage compliance on incoming certificates of insurance,” says Lee Roth, Vice President of Ebix RCS. Making COI management an important priority and not an afterthought can help.
Here’s how to put together a system that works.
Dedicate a Manager
One of the biggest challenges that arises when managing certificates of insurance is deciding which functional area within the general contractor’s organization is best suited for ownership of the process. "Performing this function effectively requires sophisticated systems and skilled staff members to manage large transactional volumes efficiently, combined with the necessary insurance expertise to properly evaluate the evidence of coverage provided on behalf of subcontractors,” Roth says. “The problem is, who should own it?” Many general contractors simply don’t have a good home for it within their organizational structure.
Without a home, the process can often be overlooked or neglected. At larger companies, risk management, legal, HR or procurement may oversee the process, Roth says. Smaller companies might give it to the administrative staff or accounting, or work with their broker or a vendor to stay on top of it. No matter who owns the process, ensure that everyone is clear on responsibilities and duties.
Dedicate the Resources
Over the years, the complexities involved in certificate management have increased and the process can be overwhelming. For example, Roth cites the challenges associated with tracking additional insured endorsements: “Years ago, evidence of additional insured status was provided on a single standardized endorsement form. More recently insurance carriers have developed their own endorsement forms to convey additional insured status. Today, there are hundreds of additional insured endorsements in use and general contractors have to have the appropriate mechanism in place to determine which endorsements are acceptable and which ones are not acceptable," Roth says.
Because the environment is constantly changing, compliance managers must stay on top of it or they might overlook coverage gaps or exclusionary language, resulting in an increase in unidentified exposure. Traditional industry approaches just aren’t going to cut it, Roth says. “General contractors must decide if they are willing to do what it takes to do this work competently or consider a third-party specialist who can perform the work on their behalf.”
General contractors need to effectively transfer contractual risk but also to make business decisions and allow exceptions from time to time. Sometimes it’s about finding the balance between protecting the organization and getting work done, Roth says. He suggests that each general contractor should establish clearly defined criteria for making exceptions and develop appropriate workflow steps to document exceptions that have been made to ensure standard operating procedures have been followed. Ideally, the exception process should be managed on an automated basis.
To achieve this level of flexibility and responsiveness, general contractors must commit to putting the necessary systems, processes and staffing in place to achieve their risk transfer objective or look to an experienced vendor-partner to assume the process on their behalf. A qualified partner can share industry best practice information and will provide guidance for establishing business rules for administering insurance tracking tasks to best meet the organization’s overall risk-transfer objectives.