Majority of third-party vendors aren’t meeting insurance obligations
More than 20% of third-party vendors simply don’t respond when asked to verify commercial insurance coverage.
Just a quarter of third-party vendors are fulfilling insurance requirements of the companies they contract with, according to Evident ID, Inc., which noted enterprises could have significant unmitigated risks as a result.
Mandating third-party partners have coverage is one of the ways organizations can manage commercial risks. Evident gives the following scenario in its report: “A convenience store franchisor was forced to pay financial damages due to one of their franchisees having an accident in their store because the store carried insufficient insurance, even though said franchisee is contractually obligated to have an active insurance policy with a specific minimum level of coverage.”
Evident’s research also found 23% of third-party vendors didn’t respond to a company’s request for proof of insurance. Of those that did respond, more than half were not certified complaint. However, for 12% of these companies, exceptions were made that allowed them to proceed to serve the company despite failing to meet insurance requirements, Evident reported.
Just 4% of third-party insureds refused to meet the requirements and weren’t granted an exception by the company.
Around 9% met insurance requirements at some point in the past, but had since fallen out of compliance. Evident noted this is usually because of forgetting to renew policies, changes to the third-party’s business or letting coverage lapse in order to reduce overhead.
To improve the rate of coverage among third-party vendors, Evident suggests the following:
- Focus on objectives, remove barriers: Requirements that are too specific or strict drive inefficient exception processes. Emphasize overall business goals, while eliminating barriers to compliance to improve performance in this area.
- Customer first: Propel higher and faster conversion rates with automated processes that focus on the customer experience for insureds and partners alike.
- Collaborate: Work with other professionals in the insurance ecosystem, such as brokers, agents and carriers, to find ways to streamline verification processes while providing an accurate status of the policy.
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