Tag Archives: coi

COI Is a 4-Letter Word; Tech Is the Solution

The problems associated with issuing certificates of insurance (COI) are so egregious, it could be argued most insurance professionals have either forgotten their existence or ignored them altogether. Nearly 30 years ago, a court characterized the certificate of insurance as “a worthless document.” Yet little has changed — until now. With the aid of technology, promising solutions are being developed to solve the problems plaguing the outdated certificate of insurance.

There are an unlimited number of examples where the COI failed an interested party. Whether it is a lapse in coverage, incorrect limits or unknown exclusions, the COI would provide little comfort to anyone who knew the true limitations of these one-page documents. More significantly, it is often the business owner, franchisor or contractor, who have the most to lose, who are the least involved in obtaining and confirming coverage. 

It may not entirely be the fault of the industry for the COI’s apparent challenges. The alternative to COIs would require the comprehensive review of hundred-page policies and constant confirmation with carriers of their in-force status. — a costly replacement that business would prefer to avoid.

Why COIs Are a Cause for Concern

The sheer number of challenges associated with certificates of insurance should make any agent or insured take pause. Deemed nothing more than an informational piece of paper, COIs are consistently issued to businesses that are only looking to tick a box off a checklist. On the other side, organizations that are looking to protect their interests by requesting COIs from their vendors often take minimal steps to ensure they are receiving the protection they desire. 

Consider that the COI does not:

List Exclusions — Certificates of insurance do not list the myriad of exclusions that could leave insureds without coverage. Particularly in the construction industry, insurers are keen to restrict coverage of the contractors they insure — such as the roofing contractor whose liability policy excluded roofing work, or the painter doing work for a major home builder whose policy specifically excludes tract homes. 

Confer Any Rights — A COI is “issued as a matter of information only and confers no rights.” The documents are nothing more than a summary of coverage provided by an insurance agent as evidence the insured obtained coverage. Language exists within most COIs explicitly advising that policies must be endorsed to provide additional insured status and again warns rights are not conferred in lieu of such endorsement.  

Constitute a Contract — The COI is littered with disclaimers, including language insulating agents, brokers and insurers by specifically stating “this form does not constitute a contract.” Wording continues to remove any ambiguity by stating coverage is not affirmed by the certificate. The specificity of the language is intended to remove all responsibility from the agent and the insurance company represented. 

Guarantee Notice of Cancellation — Even if a certificate of insurance has been properly produced, accurately reflecting the terms afforded within the insurance policy it represents, certificate holders are still exposed to the potential the underlying policy gets canceled. Cancellations can occur for a variety of reasons, including failure to pay premiums, unresolved audit disputes or unattended loss control recommendations. 

The ubiquitous nature of the certificate of insurance has blinded certificate holders to the glaring and obvious deficiencies they carry. Perhaps there is some reliance by insureds on the insurance producer and their errors and omissions coverage. But, again, while individual circumstances may possibly implicate an agent for inaccuracies, there remain many more reasons a certificate could fail. 

See also: A New Phase for Insurtech

The Broken Process of Issuing Certificates 

While certificates of insurance themselves are unquestionably flawed, we must also look at the industry’s standard practice of how COIs are issued. In doing so, we can begin to grasp how something designed to be quick and efficient has become an exposure even for those being insured. 

Cutting costs in any industry commonly relies on reducing tasks to the lowest common denominator. Insurance is no exception. The issuance of certificates has become so procedure-based, their significance has been all but lost. 

Take franchisors. They request that franchisees procure insurance and forward proof of coverage in the form of a certificate of insurance. As the first step, franchisors provide very clear instructions regarding the type of coverage required. But from this point forward vulnerabilities in the process are exposed. 

Insurance Placement — The franchisee solicits quotations from local insurance agents to obtain the necessary coverage. While franchisees rely on producers to obtain the appropriate limits of coverage, the desire to place coverage at the most competitive premium could lead less experienced agents to place coverage that has unfavorable conditions or exclusions.   

CRM Input — Insureds’ data, including coverage information, lives inside the insurance agency’s client relationship management program. Commercial lines have not been as fortunate as their personal lines counterparts in that nearly all coverage information must be input manually. When human hands are involved, there lies the possibility of inaccuracies. 

COI IssuanceMost of today’s CRM programs can automatically populate and print Acord forms, including the standard certificate of insurance. If the client service manager assumes the CRM information is correct, any errors entered previously will be transposed onto the certificate of insurance.

Receipt of the COI — This last step of the process is where our concern primarily lies. Often there is a clerk on staff with a franchisor (or other interested party) who receives the certificate of insurance and does nothing more than crosscheck the information against a checklist. Rarely are insureds requesting policy copies to identify any potential coverage gaps or exclusions. 

The certificate of insurance is a snapshot in time. Even if every step of the process has been followed to produce an accurate COI, the document can only be relied on in that moment. Any reliance on the COI as proof of coverage after its initial insurance can be undermined by midterm endorsements or an unforeseen cancellation. 

Who Will Transform the COI Process?

Without the hand of technology involved, the only sure-fire solution to ensure the policy provides coverage as intended remains a painstakingly manual process. It remains incumbent on insureds and other interested parties to review policies in their entirety to confirm coverage. Regrettably, today such reviews can only be tackled by the largest of companies with both the necessary personnel and deep enough pockets. 

However, as insurtech begins to penetrate deeper into the commercial lines space, technological developments for the less exciting aspects of insurance, such as the COI, will follow. Because the challenges associated with certificates of insurance are so pervasive, solutions will likely be developed by several different drivers. 

Carrier-Centric — Insurance carriers will continue to work on improving the customer experience either directly with the consumer or through agents and brokers. Carrier-centric solutions would offer an additional way to build brand loyalty and increase policy retention. Insureds who have experienced an uninsured claim after collecting a COI may be willing to part with the ability to shop their coverage in exchange for more certainty with their certificates. 

Industry-Driven — Industries relying most heavily on COIs to conduct their business may not wait for their insurers to present a solution. Instead, individual industries may take it upon themselves to force carriers to develop solutions under the threat of moving their business elsewhere. Industries or individual businesses with enough weight to broach the issue may also have the capacity to develop insurance pools tailored to their own needs, eliminating the need for COIs for those who participate. 

Third Party Insurtech — Technology solutions, independent of a single insurance company and with the ability to serve multiple industries, can offer the flexibility necessary to satisfy the various needs of agents, carriers and insureds. Acting as a bridge, third-party technology companies can bring many insurers together to serve those industries desperately seeking a way to confidently rely on the COI. 

There is plenty of room in the marketplace for one or more drivers to profoundly change the COI process. How solutions are designed and implemented will likely set the stage for how certificates are issued in the future, regardless of the innovator. 

See also: How Digital Health, Insurtech Are Adapting

How Technology Will Transform the COI 

Technology tends to improve existing processes or services only slightly. Irrespective of who will develop technologies to tackle the COI’s challenges, success will only come once all its related concerns have been addressed. In fact, perfunctory improvements could actually further overstate the already misleading sense of security certificates present.  

This problem necessitates a truly comprehensive solution for the COI — an answer where certificates can be relied upon in real time, any time.

Developing such a complete solution requires the entire COI process be examined through the eyes of all interested parties, from insurer to insured. In between the two, we must also investigate whether brokers are required or should even be involved in facilitating certificates. 

Ultimately, we must look through the lens of our named and additional insureds who hold all the risk in this equation. Often naïve to the COI’s deficiencies, they deserve better from the insurance industry. Now is the time for technology initiatives to reimagine the certificate of insurance and the issuance process. The best solution will be so transformative it may be unrecognizable in comparison with today’s practices. The industry will question why COIs were ever handled any other way.


13 Emerging Trends for Insurance in 2016

Where does the time go?  It seems as if we were just ringing in 2015, and now we’re well into 2016. As time goes by, life changes, and the insurance industry—sometimes at a glacial pace—does, indeed, change, as well. Here’s my outlook for 2016 on various insurance topics:

  1. Increased insurance literacy: Through initiatives like The Insurance Consumer Bill of Rights and increased resources, consumers and agents are both able to know their rights when it comes to insurance and can better manage their insurance portfolios.
  2. Interest rates: The federal funds target rate increase that was announced recently will have a yet-to-be determined impact on long-term interest rates. According to Fitch Ratings, further rate increases’ impact on credit fundamentals and the longer end of the yield curve has yet to be determined. Insurance companies are hoping for higher long-term rates as investment strategies are liability-driven. (Read more on the FitchRatings website here). Here is what this means: There will not necessarily be a positive impact for insurance policy-holders (at least in the near future). Insurance companies have, for a long period, been subsidizing guarantees on certain products or trying to minimize the impact of low interest rates on policy performance. In the interim, many insurance companies have changed their asset allocation strategies by mostly diversifying their portfolios beyond their traditional holdings—cash and investment-grade corporate bonds—by investing in illiquid assets to increase returns. The long-term impact on product pricing and features is unknown, and will depend on further increases in both short- and long-term interest rates and whether they continue to rise in predictable fashion or take an unexpected turn for which insurers are ill-prepared.
  3. Increased cost of insurance (COI) on universal life insurance policies: Several companies—including Voya Financial (formerly ING), AXA and Transamerica—are raising mortality costs on in-force universal life insurance policies. Some of the increases are substantial, but, so far, there has been an impact on a relatively small number of policyholders. That may change if we stay in a relatively low-interest-rate environment and more life insurance companies follow suit. Here is what this means: As companies have been subsidizing guaranteed interest rates (and dividend scales) that are higher than what the companies are currently (and have been) earning over the last few years, it is likely that this trend will continue.
  4. Increasing number of unexpected life insurance policy lapses and premium increases: For the most part, life insurance companies do not readily provide the impact of the two prior factors I listed when it regards cash value life insurance policies (whole life, universal life, indexed life, variable life, etc). In fact, this information is often hidden. And this information will soon be harder to get; Transamerica is moving to only provide in-force illustrations based on guarantees, rather than current projections. Here is what this means: It will become more challenging to see how a policy is performing in a current or projected environment. At some point, regulators or legislators will need to step in, but it may be too late. Monitor your policy, and download a free life insurance annual review guide from the Insurance Literacy Institute (here).
  5. Increased complexity: Insurance policies will continue to become more complex and will continue their movement away from being risk protection/leverage products to being complex financial products with a multitude of variables. This complexity is arising with products that combine long-term care insurance and life insurance (or annuities), with multiple riders on all lines of insurance coverage and with harder-to-define risks — even adding an indexed rider to a whole life policy (Guardian Life). Here is what this means: The more variables that are added to the mix, the greater the chance that there will be unexpected results and that these policies will be even more challenging to analyze.
  6. Pricing incentives: Life insurance and health insurance companies are offering discounts for employees who participate in wellness programs and for individuals who commit to tracking their activity through technology such as Fitbit. In auto insurance, there can be an increase in discounts for safe driving, low mileage, etc. Here is what this means: Insurance companies will continue to implement different technologies to provide more flexible pricing; the challenge will be in comparing policies. The best thing an insurance consumer can do is to increase her insurance literacy. Visit the resources section on our site to learn more.
  7. Health insurance and PPACA/Obamacare: The enrollment of individuals who were uninsured before the passage of Obamacare has been substantial and has resulted in significant changes, especially because everyone has the opportunity to get insurance—whether or not they have current health issues. And who, at some point, has not experienced a health issue? Here is what this means: Overall, PPACA is working, though it is clearly experiencing implementation issues, including the well-publicized technology snafus with enrollment through the federal exchange and the striking number of state insurance exchanges. And there will be continued challenges or efforts to overturn it in the House and the Senate. (The 62nd attempt to overturn PPACA was just rejected by President Obama.) The next election cycle may very well determine the permanency of PPACA. The efforts to overturn it are shameful and are a waste of time and money.
  8. Long-term care insurance: Rates for in-force policies have increased and will almost certainly face future increases—older policies are still priced lower than what a current policy would cost. This is because of many factors, including the prolonged low-interest-rate environment, lower-than-expected lapse ratios, higher-than-expected claims ratios and incredibly poor initial product designs (such as unlimited benefits on a product where there was minimal if any claims history). These are the “visible” rate increases. If you have a long-term care insurance policy with a mutual insurance company where the premium is subsidized by dividends, you may not have noticed or been informed of reduced dividends (a hidden rate increase). Here is what this means: Insurance companies, like any other business, need to be profitable to stay in business and to pay claims. In most states, increases in long-term care insurance premiums have to be approved by that state’s insurance commissioner. When faced with a rate increase, policyholders will need to consider if their benefit mix makes sense and fits within their budget. And, when faced with such a rate increase, there is the option to reduce the benefit period, reduce the benefit and oftentimes change the inflation rider or increase the waiting period. More companies are offering hybrid insurance policies, which I strongly recommend staying away from. If carriers cannot price the stand-alone product correctly, what leads us to believe they can price a combined product better?
  9. Sharing economy and services: These two are going to continue to pose challenges in the homeowners insurance and auto insurance marketplaces for the insurance companies and for policy owners. There is a question of when is there actually coverage in place and which policy it is under. There are some model regulations coming out from a few state insurance companies, however, they’re just getting started. Here is what this means: If you are using Uber, Lyft, Airbnb or a similar service on either side of the transaction, be sure to check your insurance policy to see when you are covered and what you are covered for. There are significant gaps in most current policies. Insurance companies have not caught up to the sharing economy, and it will take them some time to do so.
  10. Loyalty tax: Regulators are looking at banning auto and homeowners insurance companies from raising premiums for clients who maintain coverage with them for long periods. Here is what this means: Depending on your current auto and homeowners policies, you may see a reduction in premiums. It is recommended that, in any circumstance, you should review your coverage to ensure that it is competitive and meets your needs.
  11. Insurance fraud: This will continue, which increases premiums for the rest of us. The Coalition Against Insurance Fraud released its 2015 Hall of Shame (here). Insurance departments, multiple agencies and non-profits are investigating and taking action against those who commit elder financial abuse. Here is what this means: The more knowledgeable that consumers, professional agents and advisers become, the more we can protect our families and ourselves.
  12. Uncertain economic and regulatory conditions: Insurance companies are operating in an environment fraught with potential changes, such as in interest rates (discussed above); proposed tax code revisions; international regulators who are moving ahead with further development of Solvency II; and IFRS, NAIC and state insurance departments that are adjusting risk-based capital charges and will react to the first year of ORSA implementation. And then there is the Department of Labor’s evaluation of fiduciary responsibility rules that are expected to take effect this year. Here is what this means: There will be a myriad of potential outcomes, so be sure to continue to monitor your insurance policy portfolio and stay in touch with the Insurance Literacy Institute. Part of the DOL ruling would result in changes to the definition of “conflict of interest” and possibly compensation disclosure.
  13. Death master settlements: Multiple life insurance companies have reached settlements on this issue. Created by the Social Security Administration, the Death Master File database provides insurers with the names of deceased people with Social Security numbers. It is a useful tool for insurers to identify policyholders whose beneficiaries have not filed claims—most frequently because they were unaware the deceased had a policy naming them as a beneficiary. Until recently, most insurers only used the database to identify deceased annuity holders so they could stop making annuity payments, not to identify deceased policyholders so they can pay life insurance benefits. Life insurers that represent more than 73% of the market have agreed to reform their practices and search for deceased policyholders so they can pay benefits to their beneficiaries. A national investigation by state insurance commissioners led to life insurers returning more than $1 billion to beneficiaries nationwide. The National Association of Insurance Commissioners is currently drafting a model law  that would require all life insurers to use the Death Master File database to facilitate payment of benefits to their beneficiaries. To learn more, visit our resources section here. Here is what this means: Insurance companies will not be able to have their cake and eat it too.

What Can You Do?

The Insurance Consumer Bill of Rights directly addresses the issues discussed in this article.

Increase your insurance literacy by supporting the Insurance Literacy Institute and signing the Insurance Consumer Bill of Rights Petition. An updated and expanded version will be released shortly  that is designed to assist insurance policyholders, agents and third party advisers.

Sign the Insurance Consumer Bill of Rights Petition 

What’s on your mind for 2016? Let me know. And, if you have a tip to add to the coming Top 100 Insurance Tips, please share it with me.

How to Find Mobility Solutions (Part 1)

Please consider this post to be a sort of noodlin’ around the ways insurers could apply mobility solutions. I do have a bias: I think that until insurers, and insurance agencies/brokers, can operate entirely using apps on smart devices they can’t really call themselves “mobile-next.”

To find potential insurance mobility solutions, focus on the customer (you know, the rascal who pays the premiums) and enable him to:

  • Access the insurance company/insurance agency web site using a smart device. This means that the insurance firm (carrier or agency) has to have the ability to push requested information to the customer’s smart device in a manner that fits the smart device. Fit for purpose, as it were.
  • Request and consume service on a smart device. This includes getting served in the manner the customer wants, whether text, voice or video and preferably in real time. This means the insurance firm must have the business operational service systems in the “state” necessary to provide effective and efficient service to the customer in the desired manner.
  • Self-serve by using a smart device. This would include accessing and downloading documents stored in the insurance firm or perhaps in a private cloud set up for the customer (whether COI, policy forms, claim forms or loan forms).
  • Begin and preferably finish a policy application entirely on the smart device using e-signatures (which were approved way back during President Clinton’s administration). I realize that quotes/rates and underwriting decisions could very well mean that it is not a “sign on and get it done in one shot” kind of situation. However, whatever stops and starts happen, the policy application process should stay in the mobile realm and never require the customer, anyone in the agency or anyone in the carrier to have to re-enter information.
  • File the first notice of a loss and track the entire journey of the claim adjudication from beginning to end, including getting an alert when the claim check is deposited in the customer’s requested banking account.
  • Use the smart device to pay a premium by taking a picture of a check rather than mailing in a check or even using a payment service to pay the premium amount.
  • Collaborate with claim managers, customer service representatives or others in the insurance firm (carrier or agency) using only the smart device.

Next post, I’ll discuss potential mobility solutions for producers. Being wildly creative about blog titles, I’ll call the post “How to Find Mobility Solutions (Part 2).”

But sticking with the insurance customer, what mobility applications would you add to the list above?

Increasing COI Compliance

There is mounting evidence that third-party providers of certificate-of-insurance management services can go well beyond the rote skill of tracking certificates and can improve COI compliance. That is an important issue for many companies given that, nationally, seven out of 10 COIs have been shown to be noncompliant, opening up companies to all kinds of exposure to risk.    

The most efficient and accurate process to review COIs relies on a human model, where deep insurance knowledge is supported by technology, rather than the other way around.  These professionals are typically highly experienced and credentialed insurance experts who review documents to find the issues that transcend the “dot the i’s and cross the t’s” recognition of machine-based systems and move into the realm of nuance, trend and pattern.  Only after the challenges are corrected does technology intervene to confirm corrections on a quality-assurance basis and to deliver reports.

Employing these experts is a significant burden on costs and infrastructure for most any company.  However, based on economies of scale, these insurance professionals who are so crucial to the process can be employed by third-party COI management firms and shared by the companies that truly need them, thus spreading the cost.  With this in mind, there seems to be a significant upside to consider partnering with outsourced systems.

When it comes to COI management — especially within the Fortune 500 community, in which there is a tremendous tonnage of COIs to track and manage — organizations face a choice.  Does it add value to outsource or not?   In the case of COIs, it’s not only a cost-savings issue — although coming to a complete understanding of all the costs and resources  involved to properly manage the process internally can be eye-opening  — but is an efficacy issue, as well.   If the typical Fortune 500 company receives between 5,000 and 10,000 COIs over the course of a year, between 3,500 and 7,000 (or more) of those COIs will need to be followed up with, tracked down and resubmitted for review.

So, if outsourcing not only provides a significant cost savings but also an increase in COI compliance and accuracy, there would be a pretty strong business case for its implementation. Obviously, corporate management is thinking the same way because the demand for COI management outsourcing is growing.  In fact, more than 70% of senior executives predicted that demand for outsourcing would become even more prevalent over the next three years, in a 2011 study conducted by Accenture and the Economist Intelligence Unit.  

The expertise required for COI compliance is extensive, and not readily found in-house.   Here are some questions you need to ask yourself in evaluating the quality of your personnel and infrastructure with regard to COI management:

  1. Do your people really understand insurance? 
  2. Do your resources know what they should be looking for on the certificate?
  3. Do they know how to figure out if the certificate meets your requirements? 
  4. Do you also require endorsements and other supporting documents from your insureds?
  5. What reporting tools exist?
  6. How do you audit in the case of a claim?

Not only does COI management require administrative personnel to handle the daily clerical to-dos and followup activities, but COI management also takes the risk manager’s focus away from the strategic initiatives and other critical functions that deserve full attention.  The risk manager’s plate is more than full — it is overflowing.  Outsourcing COI management cleans up a task that should not hit the risk manager’s desk in the first place.   

Recently, technological innovations such as partially automated systems have taken hold in outsourced COI management.  This value has been enhanced with state-of-the-art, cloud-based systems that operate transparently, away from a client company’s infrastructure.  Not only does this approach provide tremendous savings in IT infrastructure and training, but it allows specialists in COI management to treat the work as though they were right down the hall.  In fact, there are some best-of-breed outsourced COI management companies that maintain full-time professionals who operate as an extension of a client’s risk management department.

Things to consider

1. What is the status of your current positioning in relation to managing vendor risk?

  • Type of insurance program you have
  • How much of it is under your control?
  • Knowledge of staff
  • Internal policies and procedures
  • Support from the top
  • Ramifications/penalties for vendor noncompliance
  • The contract language you use
  • What is the contract for?
  • Effective contractual risk transfer
  • Separate departments in various locations
  • Disconnect between the importance of vendor and the need for a compliant certificate
  • Decentralized vendor and contract tracking
  • Standardized insurance requirements

2. Elements to consider in your vendor contracts

  • Clear, concise and standardized
  • Insurance provisions support indemnity provisions
  • Language on certificates — applicable law
  • The contract is your binding document!
  • Don’t ask for things you don’t need and, if you need them, be ready to explain why!
  • Use your broker or agencies with similar exposures as a resource when determining new requirements
  • Limit any waivers or changes
  • Authority to agree to any changes or waivers should be extremely limited
  • Always consult with your legal team

3. Key vendor issues

  • Do not always understand the requirements in the contract before signing
  • Do not pay premiums on time, letting coverage lapse
  • Change insurance agencies often, making it difficult to maintain compliance
  • Do not communicate effectively with broker before signing agreement or after certificate is submitted

4. Certificate holder operational objectives

  • Central certificate tracking methodology
  • Standardized workflow
  • Centralize organization via single access point
  • Centralize deports
  • Easy access to information
  • Accountability
  • Provide clear contractual requirements
  • Provide single collection point for certificates
  • Provide a sample certificate that can be easily accessed by vendor and broker
  • Provide a centralized communication process for both vendor and broker
  • Outline specific consequences for non-compliance

5.  Smaller vendors = larger liability

  • Risk control programs are not as advanced
  • More willing to cut corners (let insurance lapse)
  • Oftentimes do not fully understand insurance requirements and why they apply
  • The most efficient way to deal with these vendors is through direct contact with their broker

6. Characteristics of larger vendors

  • Often use standardized COIs, which cannot easily be modified to reflect additional information if requested for clarity purposes
  • Self-insurance plays a larger role
  • Strong risk control programs
  • More likely to push for limited risk transfer
  • Often request contract language modifications
  • They resist whenever possible – these changes are usually not to your benefit
  • More emphasis is placed on policy language, which requires work with the broker and the insurance company to verify specific information not included on their COI


So when does outsourcing COI management make sense?  Does it cost more money for your organization to hire the talent in-house or to outsource? Just as important, can a trusted vendor do the work better?   

If your company has a compliance-centric culture, there is a clear benefit to leveraging a flexible COI support team that understands insurance language and  can quickly refine its talent mix to support your needs — a capability you probably do not have in-house.   An increasing number of executives are finding that outsourcing can create a strategic advantage, especially for a dynamic and distributed organization whose needs are often rapidly changing.

With regard to economics, an outsourcing provider has economies of scale, knowledge expertise and the dedicated infrastructure that make its solution more affordable and cost-effective than doing the work in-house.  Outsourcing the COI management processes can cost half as much as doing the work in-house, and, with the right system, you can ultimately make yourself more attractive to insurance markets for your business.

With few exceptions, outsourcing is a viable option for you that can result in operating cost reductions and better strategic insight. 

10 Tips to Achieve Increased COI Compliance

  • A strong insurance program
  • Clear contract language
  • Effective internal policies and procedures
  • Gain support from the top
  • Good relationships with your broker and counterparts
  • Willingness to reach out to the vendor’s broker or insurer if questions arise
  • Provide a centralized tracking methodology that can be shared among all departments, divisions and locations
  • Create a standardized workflow for internal and external users
  • Provide a centralized communication among vendor, broker and client personnel
  • Training, training, training. . . .