The State of Third-Party Insurance Verification – Research Report
April 6, 2021
Last year, we saw the devastating effects of climate change, an unparalleled rise in civil unrest, and unprecedented economic strife. COVID-19 sparked a literal chain reaction of stressful events that brought long-overdue attention to our societal instabilities.
The combination of these turbulent events – and the systemic issues that were brought to light amidst these events – has impacted insurance premiums and claims, both of which have been steadily increasing for more than a year.
Aside from the more obvious increases in medical liability premiums due to the pandemic health crisis, we’re seeing additional increases in cybersecurity insurance rates, professional liability rates, and global commercial insurance pricing.
Along with premiums increasing, coverage limits are being reduced. For many businesses, managing insurance risk was simple – look at your losses from previous years (e.g. lawsuits, claims, and fines), and use those numbers to estimate next year’s loss. With premiums increasing and coverage decreasing on multiple fronts, this practice may not be able to accurately predict a business’ potential losses.
What we’re learning now in 2021, as new risks continue to emerge, is that 2020 was not just an anomaly, but rather a pivot point into a new world for risk. And while none of this is anyone’s “fault,” it’s up to risk managers, legal teams, and insurance compliance experts to find new ways to protect their businesses.
You can’t control the weather, crime, civil unrest, or a global pandemic. You’ll make sure your insurance coverage is adequate even if it costs more and covers less, but one area you can control, is how exposed you are to other businesses and how well they are protected. While third-party insurance verification falls into that category of “good enough as long as my annual losses don’t increase,” it’s actually an area of opportunity for most businesses to avoid unnecessary risk.
Compliance levels vary widely from company to company, as does capability and resources, most of which can stand to improve – and with the costs of non-compliance rising fast, this should be an area of serious consideration for most enterprises.
First, consider your current level of compliance. Of all your partners, vendors, franchisees, contractors, etc., how many have provided you with actual proof that they meet your insurance requirements (via a COI or otherwise)? Of those COIs, how many are accurate and in compliance? Evident works with companies where as little as 1 in 4 COIs are actually compliant.
Next, ask yourself how many have you listed as an “Additional Insured.” Many companies find themselves significantly under-covered… like Captain America with only half of his shield.
Finally, ask yourself if your processes and/or technology are setting you up for success. What do you do if you don’t get a response from your Insureds? Do you have resources to interpret COIs and determine if requirements are met? Can you help your Insureds get additional coverage to make them compliant? Are you continuously monitoring your Insureds’ coverage?
Avoiding business risk in 2021 will require that risk management teams put forth additional time and effort, which is already in short supply. This is where technology, automation, and product innovation can help, because it’s not just about having more COIs on file to demonstrate your compliance, it’s about having up-to-date insurance information – dates, coverages, and status – all the time, and all at your fingertips.
Solutions that help you monitor supply chain insurance gaps, detect new ones, and fix them quickly should also cost you a lot less, since it’s helping you save money in the long-term by reducing your near-term risk.
Evident is helping retailers across the country cut their risk levels in half within the first few months, because we’ve automated their entire COI collection, verification, and monitoring process, and we’ve made it easier for them to get their third-party vendors and suppliers closer to compliance with their corporate insurance requirements.