6 Tips to Mitigate Construction Project Risk
There are many factors that 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. However, according to the Pulse of the Profession Survey, 74% of organizations inconsistently utilize risk management processes. Failing to accurately validate a subcontractor’s certificate of insurance (COI) or endorsement can cost a GC millions of dollars.
Check out the six tips highlighted below to prevent subcontractor insurance fraud, costly claims and expensive construction project delays.
Tip #1 – Review Previous Construction 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 previously. Identify the areas of risk and how they were originally processed. Conduct an overall risk review of what went well or failed on the project. Check compliance performance for vendors and subs and create improved processes for the upcoming projects based on previous findings.
Tip #2 – Catch a Fraudulent COI
Unfortunately, it’s quite 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 is not an ACORD 25 COI form, it’s probably a good idea to investigate the coverage. All content on a COI should also 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. Utilize tools like ambest.com to locate and validate 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 – Implement 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 will cut corners and the first ones to cut are usually pertaining 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. Ensure each COI is issued to the right company. The risk management team must know which coverage’s 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, as well as and can leave your company vulnerable to potentially costly claims if an error were to occur. Start digitally managing your compliance process 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 will 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 manually managing files. Finally, you will also be able to automatically 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 digitally manage your vendor and subcontractor certificates of insurance and endorsements, check out SmartCompliance.
With our solution and services, you’ll be able to easily and accurately track COIs, send automated alerts before non-compliance becomes an issue, eliminate manual COI data entry, and guarantee your company is protected. Request a free demo today to see how our solution can ensure that all of your future projects are covered, so you can focus on what you do best…completing a successful project.