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6 Questions that will change the way you think about Certificates of Insurance
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6 Questions that will change the way you think about Certificates of Insurance

The entire reason for requesting a supplier’s Certificate of Insurance is to confirm that they are indemnified.

February 8, 2022

June 16, 2020
3 min read

Updated: Oct 29, 2020

What’s the real purpose of Certificates of Insurance?

The entire reason for requesting a supplier’s Certificate of Insurance is to confirm that they are indemnified.  The reality is that a Certificate cannot do that - no piece of paper can.  The certificate is not a binding agreement, it simply serves to deliver information.  Even with a valid certificate of insurance on record, a vigilant compliance manager will still call the insurer or broker directly to verify the coverages displayed on the certificate.  The Certificate has served no practical purpose beyond the supplier asserting that they have the coverages shown on the paper on the date of issuance.

What’s wrong with the current COI process?

The entire process, including the very document this process is based around, has barely changed in over 40 years.  Companies request COIs from their suppliers.  Suppliers request their brokers send COIs.  Brokers painstakingly produce certificates and then send the document by mail or PDF an image.  This slow process is labor-intensive and error prone. Once received, the certificate holder must then manually compare the coverages to their requirements.  This monitoring is all done on spreadsheets or using COI management programs.  The fundamental problem is that the data being monitored is reflective of a single point in time when, realistically, policy information can change any minute.

Is digital insurance verification really better than my Certificate?

The FBI estimates that commercial insurance fraud costs American businesses more than $40 billion per year.  Much of that fraud would be impossible except for paper-based verifications that certificate holders are forced to rely on.  When suppliers buy their insurance the information is recorded on their insurers and brokers’ computers.  The most efficient way to verify those policies is to get access directly to that data.  Using readily available technology we can now connect systems so that changes in your supplier’s insurance automatically alerts your compliance program and could even alert your payroll and security systems.  PDFs cannot do that.  

Why hasn’t someone fixed COIs before this?

When a solution seems so obvious, it produces skepticism about why the problem hasn’t already been fixed.  In the case of Certificates of insurance, there have been two primary hurdles.  First, insurance providers have been slow to institute open systems allowing customers and third-party vendors access to their systems via Application Programming Interfaces (or APIs).  While still years behind most other industries, insurance providers are finally allowing such access – this will create enormous opportunity to improve compliance and reduce fraud.  The second hurdle has been the problem of conflicting interests.  Certificate holders demand a platform that allows them to monitor supplier policies. Agents and brokers need a means to deliver insurance verification as efficiently as possible. Suppliers simply want the ability to satisfy the Cert Holder’s request in a cost-effective manner. Finally, who should pay to develop this innovative data-sharing solution?  Certificial was conceived to meet all of these needs and has independently paid for and filed patents for the new platform making it independent of any particular insurance provider.

When will digital COIs be available?

While it may take time for all insurance providers to integrate with the Certificial system – the benefits of digitizing your policies and those of your suppliers are available now.  We anticipate that up to half of all commercial policies will be accessible for online monitoring via direct connections with suppliers’ insurance providers before the end of 2020.  Certificate holders will be able to immediately monitor all of their suppliers on the system and many, if not most, will be available for real-time monitoring.  Some companies will soon be demanding that their suppliers provide digital verification and not just paper-based Certificates of Insurance.  

Are digital COIs cost effective?

Technology that eliminates manual processing can be extremely costs effective.  Certificial’s digital insurance verification is a cloud-based, software-as-a-service platform.  There are no implementation costs or hidden fees.  Companies pay for the ability to monitor suppliers’ digital Certificates of Insurance.  However, the immediate savings produced as a result of improved operating costs may pale when compared to the potential savings resulting from improved compliance and fraud reduction.