6 Tips to Mitigate Construction Project Risk
Many factors can delay or ruin a construction project. A volatile economy, weather conditions, mechanical or material malfunctions, permits, etc. Of all the items that “pause” a successful project, subcontractor insurance compliance shouldn’t be on the list. But, according to the Pulse of the Profession Survey, 74% of organizations inconsistently use risk management processes. Failing to validate a subcontractor’s certificate of insurance (COI) or an endorsement can cost a GC millions of dollars.
Check out these six tips to prevent subcontractor insurance fraud, costly claims, and expensive construction project delays.
Tip #1 – Review Previous Constriction Project Risk
If your company has experienced costly claims or expensive project delays due to an invalid subcontractor or vendor COI, look at what happened in that situation. Conduct a risk review of what went well or failed on the project. Check compliance performance for vendors and subcontractors and create improved processes for the upcoming projects based on previous findings.
Tip #2 – Catch a Fraudulent COI
It’s simple to go online and fake a certificate of insurance. The best way to sniff out a fake COI is to look for the “ACORD 25” in the lower-left corner of the form. ACORD is the Association for Cooperative Operations Research and Development, which sets the insurance standards in the industry. If the document isn’t an ACORD 25 form, it’s a good idea to investigate the coverage. All content on a COI should have the same font, with the only exception being the electronic signature.
Tip #3 – Check if Insurers are Legal Companies
If you come across a COI with an insurer, you’re unfamiliar with, contact your insurance agent or the issuing agent of the COI to make sure they’re a legitimate company. Use tools like ambest.com to locate and confirm the insurance company’s rating. If a COI comes from a company with a rating of B or lower, it’s best to avoid accepting that COI.
Tip #4 – Put in Place Rational Project Timelines
It’s important to set reasonable timelines for construction projects. For example, if project managers feel like they’re working against the clock, they’ll cut corners; and the first cut often pertains to compliance.
Also, if your project timeline is too tight, experienced insurance companies will recognize the rushed completion dates and charge higher premiums. When projects are on a tight schedule, contractors feel rushed, which leads to a higher risk of injuries or accidents, forcing the insurer to charge you more for the specified coverage.
Tip #5 – Understand Your Contract & Check for Correct Coverage
The contracts in place can vary based on the project, scope, or third party. The risk management team must know which coverages are acceptable for each contract. Make sure your team is knowledgeable and trained to identify inaccurate insurance exclusions and endorsements, as well as review policies against the contract to ensure compliance.
Make sure to read over the policy and check for any misspelling’s, inaccurate contact information, accurate policy dates are in place, and if the broker is still active with the provided policy. Also, set up a reminder to request an updated COI from the sub a month in advance of the policy expiration date to ensure compliance.
Learn more about how to review an ACORD 25 form like a pro here.
Tip #6 – Digitally Issue, Collect, & Review Certificates of Insurance
Managing risk by tracking COIs manually is time-consuming and wastes resources, and can leave your company vulnerable to expensive claims if an error were to occur. Start managing your compliance process in a digital system to ensure you have an active and accurate COI from every contractor working on the job site or project.
With an online COI tracking solution, you’ll be able to consolidate all sub and vendor insurance data into one platform and get 24/7 access to the compliance status of each company. Automatically send requests for updated or missing COIs to limit time and resources spent managing files. You’re also able to scan certificates, transcribe the data, and compare to your customized risk requirements to guarantee the accurate coverage is in place.
Construction projects shouldn’t have to stop due to compliance issues. If you’re looking for an easy-to-use, cloud-based platform to manage your vendor and subcontractor certificates of insurance and endorsements, check out SmartCompliance.
With our solution and services, you’ll be able to track COIs, send automated alerts before non-compliance becomes an issue, end manual COI data entry, and guarantee your company has protection. Request a free demo today to see how our solution ensures that all your future projects have coverage, so you can focus on what you do best…completing a successful project.