Insurance agencies and certificates of insurance

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It goes almost without saying that handling requests related to certificates of insurance (COIs) are a vexing task for the insurance agency. Improper processing can leave the agency exposed to potentially significant errors and omissions (E&O) liability. In fact, issues related to COIs are the leading cause of E&O claims against insurance agencies. Moreover, the process can be time-consuming and thankless; most agencies issue COIs without payment for this important service.

It gets worse… The agency is often caught in the middle of a struggle between attempting to satisfy the needs of its clients while following proper procedures designed to avoid E&O exposure and remain within the law.

Agencies know the heat is on - states are steadily tightening up their regulations regarding certificates of insurance and are actively prosecuting agents for misrepresentation and fraud. Fines, loss of agency license and even jail time are being handed down by state courts.

In a study published by the Independent Insurance Agents of Texas, they cite two primary reasons for E&O claims arising out of the issuance of COIs by the agency:

  • Pressure from their customer to prepare a COI in such a manner as to assist the customer in being awarded a contract to perform work, and
  • Intentional or unintentional mistakes by agency personnel who prepare a COI that reflects or implies non-existent coverages.

What to do? Tens of millions of COIs are issued every year. They are deeply woven into the fabric of commerce and aren't going away, at least not any time soon.

It's no wonder so many agents hate them.

Not surprisingly, the general thrust of the solution resides in education of agency producers and Customer Service Reps. The IIAT study recommends:

  1. The agency must gain control over the COI issuance process,
  2. Agency managers must develop procedures to ensure COIs are checked for accuracy and legal compliance prior to issuance, and
  3. Policyholders and certificate holders must be educated regarding the legal limitations under which the agency must operate.

To assist in the effort, the following resources may prove useful to both agency personnel and risk managers:

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