Part 2: Three Steps to Creating and Maintaining a Risk Transfer Program
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In addition to developing clearly worded contracts and other agreements, contractors can take additional steps to ensure risk transfer efforts are maintained and refined over the long-run. We outlined three steps to help get you started.
1. Implement a risk transfer and certificate tracking program.
The purpose of a tracking program is to make certain a business is aware of the third-party entities with which it is doing business, as well as any potential liabilities that may arise with these entities, such as a lack in coverage.
A tracking program allows you to obtain, analyze and monitor your third-party certificates of insurance. It also provides a checks-and-balances system to ensure receipt of required, current certificates and signed contracts from each entity. Once such certificates are received, they can be easily analyzed to determine compliance or lack thereof. In the event of non-compliance or expiration, you can easily follow up with third parties by use of automated notices.
2. Use caution when reviewing additional insured status.
As the certificate of insurance provides a snapshot of the insured’s coverage, the level of additional insured status is driven by the endorsement itself. It’s crucial to have each additional insured endorsement reviewed by a professional to determine the level of coverage being provided.
3. Monitor and review the results.
Once your tracking program is in place, you can continue to monitor the certificates of insurance for expiration to ensure a renewal certificate is being provided in a timely manner. Your program can also help you determine compliance rates, identify potential liability exposures with high-risk entities, and develop strategies for addressing common discrepancies.
By failing to incorporate risk transfer methods into your day-to-day activities, you may expose your company to issues that could negatively impact its financial strength, as well as its insurance programs and costs. Become proactive in preventing liability exposures, rather than being reactive and paying for liabilities after the fact.
For more information on how you can improve your risk transfer practices, contact your insurance broker.
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