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You think I need an insurance compliance system?

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Companies spend millions of dollars on professional fees drafting contracts for tenants and vendors. Virtually all of them contain language specifically related to the type and extent of insurance coverage required. The deal is signed, the work begun (or the tenant moves in) and then...what? Did anyone bother to check if the terms of the agreement were actually met?

Enter the need for a Compliance System. Oh, you don't have one...

It would seem logical that the existence of rules would mandate they be properly verified. This necessitates there be established procedures for the collection, evaluation and ongoing monitoring of contractual compliance, and that there actually be someone charged with management and enforcement.

Regrettably, it is often the case that verification of insurance compliance is treated largely as a clerical function of low status and limited priority. Certificates of insurance receive cursory examination (when they are even provided), and there is no orderly means to track and manage the process. Inevitably, things begin to fall through the crack, leading to potentially catastrophic exposure. Usually this condition perpetuates until an attention-getting loss occurs, followed by the predictable scramble to repair the damage.

Simply put, on both a professional and personal level, it is untenable for a risk manager not to properly address this core management function inherent in her position.

Forward-thinking risk managers have two choices – formalize the need by establishing a dedicated staffing position, or outsource the task to a professional compliance verification service. Regardless of the path chosen, certain skills are mandatory, the most obvious being a thorough understanding of commercial property and casualty insurance. Yet this basic requirement is routinely unmet in many corporate and service provider settings, leading to high rates of non-compliance, preventable claims, waste, and an ongoing high-wire act by the company's Risk Management department.

In addition to a knowledgeable individual, compliance evaluation and tracking processes must be memorialized and followed. There must be a process. This process should contemplate judicious utilization of automation while retaining the safety net of informed and final human judgment. Apart from the requisite ease-of-use, the system should further offer robust reporting and analytic capabilities, allowing Risk Management to better glean insight from the reams of data collected.

In summary, seat-of-the-pants compliance management will ultimately lead to those pants catching fire. In an increasingly regulated and litigious corporate environment, the failure of risk managers to not elevate the issue of insurance compliance to a level equal to its other tasks is not only dangerous, it is negligent. Don't be the last one standing when the music stops.

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