According to the findings of Trusted Choice, a well-known independent insurance agent, about one in 25 commonly occurring errors in certificate of insurance is because of misrepresentation of information.  Among these, 40% errors are either false or inadvertently omitted. These two stats point to the underlying malaise in the COI issuance process – lack of updated knowledge or failure to adhere to best practices.

    Challenges Faced While Issuing a COI

An Oklahoma-based insurance agency was sued for making repeated mistakes in a certificate of insurance that was issued on behalf of a restaurant owner for the landlord? The agents missed out on the specific mention of coverage for loss of rents in the certificate.  

  • While it is a must-do practice to include all the necessary information in the document, summarizing all the information in the insurance policies within a single check-off box can be quite a daunting task. It increases the scopes of leaving out details that remain undisclosed in the certificate of insurance.
  • In most instances, the problem starts when insurers are asked to provide COIs by insureds in response to business contracts. Most of the times, insurers face additional and untenable requests such as to provide notice of cancellation or provide a specific type of coverage that insurers can’t oblige. Sometimes agents succumb to the request on behalf of the insurer.

Did you know that laws passed across 45 American states with the aid of Independent Insurance Agents and Brokers of America (IIABA) declared the issuing of misrepresented COI illegal? It also stated the legal repercussions of pressurizing an insurance agent to furnish misrepresented COIs. 

  • The lack of any specific insurance industry baseline makes an accurate portrayal of all environment insurance policy-related information a difficult job in a certificate of insurance.
  • There is a stark difference between a certificate of insurance and a policy endorsement.  Unlike COIs, policy endorsements are done to modify or correct certain aspects of a policy such as change in address, nominees etc. Insurance agents often commit the mistake of bypassing policy endorsement to introduce special wording in the COIs for some specific requests.

Things to Consider While Issuing COI

certificate of insurance services

A COI document contains lot of information in just one page. Therefore, there is a high chance of missing out on some specific information. Sometimes, the missing information can be a critical one, and can have a large repercussion leading to the contract holder suing either the vendor or the insurer. Therefore, to avert such slip ups, insurers must adopt a check-list based approach while entering all the necessary details in the COI.

Here’s a list of the information that must be entered in the document with utmost accuracy:

List of Information that an Insurer Must Include in a COI

  • Date of the form issuance
  • A disclaimer to summarize the type of COI
  • Reference of the insurance agent or the broker issuing the COI
  • Name and address of the insured with the policy
  • Details about the insured’s liability insurance coverages including general and umbrella liability, commercial auto, and workers’ compensation. It should feature the policy numbers, their start and expiry dates.
  • Insurers: each company to offer the coverage listed above
  • Liability limits: How much coverage in dollars policies provide with coverage subtype
  • Description of vehicles, operations, locations: A catch-all space to respond to specific requests such as being listed as an additional insured
  • Certificate holder: The person / company to whom the COI was issued
  • The certificate holder must be issued with a policy termination notice if a policy expires prior to the contract expiration date
  • The certificate must bear the sign of brokers, agents, or a representative of the brokers or agents.

Things that MUST Be Considered by Insurers While Issuing a COI

  • Insurance carriers should be in no way obligated by the representations made by agents or brokers in the certificate of insurance. They should only be bound by the representation made by themselves in the document.
  • In case of disputes, insurance carriers must contend the fact they are not bound by a broker’s representations in the certificate of insurance. This creates the premise of the argument about whether the broker will act as the agent of the policyholder or the insurance carrier.
  • The entity marked as an additional insured must only be given a copy of the certificate of insurance and not the policy document.
  • For a General Liability certificate, insurance BPO companies must ensure that the “each occurrence” limit of a subcontractor is at par with that of the contractor’s limit under his/her own policy. Fr instance, if a contractor’s “each occurrence” limit is valued at USD 5mn, his/her insurance carrier must ensure that the subcontract should have the same coverage amount.
  • Insurance carriers are advised to tracking software that essentially streamlines and simplifies the entire process of issuing a certificate of insurance. It assists in document storage, identifying anomalies, reaching out to vendors to address the information anomalies, tracking policy expiration.

Parting Note 

There is no more doubting the fact that certificates of insurance are more than just a piece of documents specifying the kind and quantity of insurance coverages. The growing complexities pertaining to the language, the format of content makes it essential that insurance carriers seek outside expertise for an efficient issuing of these documents. This helps in averting certificate holders citing an uninsured loss and pressurize the carrier for a coverage.

Who are We and Why are We considered as an Industry Authority?

This article is penned by experts at Insurance Back Office Pro. We are a third-party insurance support provider specializing in providing accurate assessment of certificate of insurance policy terms to safeguard the interest of insurance agencies and carriers against potential compliance violations.