Why Verify Third Party Insurance?
May 20, 2021
There are many forms of third-party risk management and in this new, highly unpredictable (and highly litigious) post-pandemic world we live in, they’re only becoming more important.
While important tools like security assessments, identity verification, and on-site inspections can and do reduce risk, only third-party insurance verification will cover you, financially, if an accident occurs and someone files a claim.
Businesses should be concerned about how easy and acceptable it has become for individuals to sue them – after all, it’s the reason why their premiums are rising at a rapid pace (sometimes referred to as “social inflation“) – and if an accident is severe enough, or if a class-action lawsuit is powerful enough, it can greatly impact a business’ brand and finances.
When an accident inevitably occurs on company property, or a vendor’s product is recalled due to their negligence, all of the traditional methods to manage third-party risk won’t give businesses any comfort or protection. They might help reduce the number of claims, but only insurance verification will pay the business after a claim is filed.
Insurance verification is a distinguishable risk mitigation tactic in that it’s the only form of third-party risk management that pays businesses when things go wrong.
Imagine a supermarket sells tainted leafy greens that make many of their customers sick. If that specific store doesn’t have adequate or up-to-date General Liability coverage and/or the leafy green supplier doesn’t have adequate or up-to-date Product Liability coverage, it’s likely that the supermarket franchise owner will end up having to cover the damages.
And it’s not just physical incidents that businesses need to worry about. Cyber attacks like phishing and ransomware can result in data breaches (and even gas shortages) that have very big financial implications.
Cyber attacks have generally become more prevalent as businesses continue to grow their networks with little to no understanding of how the third party handles their employee and customer data. Companies that proactively verify their third parties’ cybersecurity insurance coverage can avoid this very costly mistake.
Simply put, verifying a Certificate of Insurance (COI) is a simple, helpful safeguard for businesses to help them avoid risks that naturally arise from working with third parties. A COI becomes even more important when a company is working with multiple partners, and if that’s not enough, each of your third parties should be carrying their own coverage and verifying policies from their respective vendors and contractors.
Does all this talk of collecting and reviewing COIs make your head spin? We understand. Let us help you do your due diligence to check your third parties’ insurance coverage so you can protect your business against a wide range of risk variants.