Certificate tracking can seem like a complicated and tedious process, but it’s important to work out a reliable system for all of your vendors and partners to help protect your organization from excessive risk.
“You need to have their certificates on file because you want to be sure that they are carrying the required coverage, and if you need to file a claim with their carrier [that] you have the information that you need,” says Dana Gold of Dana G. Gold Risk Management and Insurance Consulting Services.
Here’s why reliable certificate tracking is so important.
It Improves Transparency
Vendor relationships work best with a healthy sense of trust and transparency, and that extends to insurance coverage. If your vendor, supplier or other business client isn’t able to provide certificates for the coverage they’re expected to carry, follow up and find out why. This could be a sign that they are lax about paperwork or even that they are trying to skimp on the coverage you expected.
But this emphasis on transparency through certificate tracking benefits both parties in a business relationship, says Mary Thompson, president of Capstone Brokerage. You want to work with vendors who appreciate the value in sharing this information.
It Protects Your Organization
Without a process or system to identify whether a certificate is compliant and meets all necessary requirements, organizations may be exposing themselves to unnecessary risks. Having certificates on file ensures that you know they’re carrying required coverage, and you have the information required if you need to file a claim, Gold says.
Consider this example: A trucking company uses independent truckers responsible for their own insurance to haul coal from a coal company. One trucker who was hauling a load was in an accident that killed a third party. The trucker was at fault, and a resulting lawsuit was filed against the trucker, as well as the trucking company and coal company.
The coal company had requested a certificate from the trucking company but had not verified that the trucking company was tracing or requesting insurance certificates from independent truckers. The trucking company requested but did not verify certificates from the truckers. Together, the lapses put all parties at unnecessary risk.
It Maintains Consistent Standards
Establishing a system ensures that everything is checked regularly and held to the same standard. Having a strong process in place will help protect your organization from unnecessary risks or errors. In addition, it helps establish uniform standards across your organization and in the work you do with customers, vendors, suppliers, service providers and subcontractors.
Some of the ways to do this include:
- Implementing a tracking solution.
- Purchasing third-party software to conduct your own tracking.
- Outsourcing tracking altogether by contracting with a fully integrated solution that conducts all certificate management and vendor compliance.
No matter what solution you choose, it’s vital that you have some kind of process in place to minimize liability and the risk of litigation, insurance claims and financial loss.