5 Steps to Improve Third-Party Compliance and Reduce Enterprise Risk
March 8, 2023
Third-party Insurance Verification is all about ensuring a vendor or business partner can cover any losses they cause and doesn’t travel upstream to your enterprise.
Currently, the insurance verification process is painful, slow, complicated, and simply doesn’t yield very good results. Some businesses say it’s just not worth the hassle to chase down every one of their partners and verify their insurance. In fact, when we dug deeper into this we found that only about 25% of third parties are actually active and verified with insurance.
Why doesn’t verification work for many companies? We have found three major factors:
- Capacity: Companies are under-resourced to chase down third-party partners, get a hold of certificates of insurance or COIs, and then analyze them.
- Process: Customers are still using PDFs, faxes, handwritten notes, and carrier pigeons (okay maybe we’ve gone too far) to chase their partners and try to get a response. And then they are manually reviewing certificates and then do more manual follow-up throughout this process, which allows ample room for errors.
- Simplification: Imagine what it’s like to get a request for something that’s complicated and involved like an insurance policy. You don’t know if you have the right document. You don’t know if it’s up to date, you really don’t have a lot of confidence in your ability to interpret it and make that decision.
To combat all of these problems, we have put together a checklist of things that risk managers can do to improve their third-party compliance rates:
- Precise Insurance Requirements to Accommodate a Wider Range of Suppliers
- Embrace Automation
- Develop Unique Risk Profiles
- Incorporate Your Broker
- Better Communication
Develop more precise insurance requirements to accommodate a wider range of suppliers
Instead of treating all your vendors equally as if they have the same risk, develop categories and specific requirements, and use a system that allows a set-it-and-forget-it function where the technology can run and evaluate each vendor based on specific requirements that you need for them. It helps reduce administration time, so you don’t need to worry about those exceptions, and where to manually place people.
See how one customer used it:
Embrace automation! Insurance Verification is tedious and manual, so the more you can automate the process, the better
You’re not trading off speed, with accuracy. Accuracy is incredibly important. Once you insert a layer of automation, it allows you to communicate and connect to your ecosystem seamlessly vs. a game of telephone. With the right system in place, you can quickly pinpoint who is not compliant and provide quick actionable results to fix.
See how one customer embraced automation:
Develop unique risk profiles for different types of third parties to support the valuation and exception process
It is important to be able to layer upon your initial requirement – either for regulatory or commercial reasons.
This verification process is not only important for third-party risk but actually fourth-party risk and so on down the chain. But these requirements are always changing.
And the really nice thing is you’re not having to go back to the well. With the right insurance verification platform you should just layer those profiles and say, ‘Does this vendor now meet this?” or ‘Does this vendor now meet that?”
This allows for a reduction in the back and forth with that vendor. And allows for more flexibility to bring on new customers who have different profiles and say, ‘Yes, I can immediately give you that audit based on the current vendors that we’re using.’ without adding any additional overhead.
See how here:
Incorporate your broker in the verification process, but in a seamless, connected way so you can trust the COI data
The current state is a burden on the actual insureds and the actual distributors. By using a single-point solution, brokers can programmatically use a solution that allows granular underlying data to be shown with a click of a button.
See how here:
Better communication and standard documentation digitalization to critical to modernizing your program
It’s important to be consistent and standardized with your communications without having to send out one-off messages (which we see all the time), especially since 25% of requests simply go unanswered.
See how here:
How Evident ID Helps
For today’s top risk leaders, managing vendor risk could be a billion-dollar worry for your team. It only takes a second for an accident to happen. But who would be responsible for the claim if your vendor isn’t properly covered? Short answer–You.
Evident is the compliance solution that enterprises trust. It helps quickly analyze Certificates of Insurance (COIs) and ensure your vendors (actually) meet your compliance standards in a matter of seconds. Learn how a COI Tracking System can help you.