Solution Needed for Proof-of-Coverage Certificates

Thursday, April 24, 2008 | 0

By Jack Gibson

Securing and providing evidence of insurance in compliance with business contract requirements is a major problem for risk managers and agents/brokers alike.

The standard tool provided by insurers -- the certificate of insurance -- offers its holder virtually no comfort or security. On the other hand, attempts by certificate holders to secure a more robust promise often violate state insurance code or Federal intellectual property law, or place agents/brokers in an untenable situation of making promises that they are not in a position to keep.

Many insurance companies no longer issue certificates. Instead they delegate that task to their agents and brokers with instructions to use a standard form. Often insurers ask their agents and brokers to refrain from even sending them copies. The agent or broker then encounters problems with requests for unauthorized modifications to the standard form or demands that a special manuscript form be used in its place. It's simply an errors and omissions claim waiting to happen.

This problem is not new -- it was alive and well 30 years ago when I started out as a risk management consultant. So why on Earth, in this era of the Internet and technological wizardry, is it still with us?

Here are a few thoughts on how an online system might work:

• The insurer sets up a web portal where certificates are requested online.
• The agent or the insured enters the certificate holder's information, including a few basic specifics about the contract requirement (such as required cancellation notice).
• The system automatically e-mails a certificate of insurance to the certificate holder, insured, and agent. The certificate could contain all the normal escape clauses to let the insurer off the hook.
• Also attached to the e-mail, if required, are applicable additional insured endorsement(s) and an endorsement(s) promising advance notice of cancellation via e-mail. The certificate's escape clauses won't apply to these.
• The certificate holder's information is maintained to allow notice of cancellation in the event this is necessary.