8 Risks That Property Managers Face When Manually Tracking COIs
As a property manager, you know all about third-party risks you need to keep track of. Working with different vendors, contractors, and tenants on your properties requires unique certificates of insurance (COIs), contracts, and compliance documents. Each agreement will define what type of insurance you need to mitigate dangers and risks for your company. When faced with this administrative burden, the risk of manual COI tracking is the first mistake most professionals tend to make.
It is difficult to resolve risk and ensure the protection of your company. That is, unless you have a way to easily track COIs that does not rely on a paper-based system. Keeping up with compliance documents manually is time-consuming and is prone to expensive human errors. This is the reason most organizations often hire a full-time employee for this process alone.
In this article, we are going to uncover the risks of manual COI tracking and how you can avoid them by using compliance management software.
Manual COI Tracking Risks That Property Managers Face
There are unique challenges that any property manager faces regarding insurance coverage. Here are the eight most common risks involving a manual process to track COIs:
1. Lapses in Renters’ Insurance
Unlike leases, tenants can cancel their insurance policy at any time. Because of this liability, some renters will purchase coverage to begin their lease and end it before the contract is up. If property managers do not regularly track tenant insurance requirements, this can become a huge problem.
According to Insurance Journal, “almost 70 percent of all renters’ policies cancel prior to renewal, mostly due to non-payment.” When this happens, you will not know unless you request up-to-date COIs throughout the lease agreement. If you do not ask for updated compliance documents, you will not know about these lapses in coverage until it is too late. At this point, the renter has the possibility of making a claim on your policy.
2. Unique Lease Agreements
Just because the units on your property are similar, does not mean the leases you have with each tenant are. Every lease with a tenant is unique in terms of the risks faced and coverage you need to request. This makes checking COIs for properties even more difficult.
Each certificate has different requirements you need to assure are filled. This is where human error comes into play. If you accept a certificate with incorrect information, you will face the risk of not having the right coverage and become responsible if a risk situation takes place.
3. Third Parties in Real Estate
In real estate, third parties include the vendors and contractors you hire for repairs on your rental property. For these workers, it is necessary to assure coverage. Because of so many third parties involved in a successful property management business, manual COI tracking is extremely complex and risky if not done in the right way.
4. Increased Expenses
If you choose manual COI tracking instead of using automated software, the costs associated with the staff member who verifies each certificate and ensures compliance are high.
5. Wasted Time
Effectively reviewing certificates takes time. Most executives simply are not aware that to be able to reach 90% compliance, an average of 38 minutes is needed for each certificate. We see that administrators only invest 15 minutes per COI – and that only equates to 50% to 60% compliance when all is said and done.
6. Skipping Critical Steps
Manual processes tend to reduce steps in the process to save time and speed up the workflow. If you are not directly involved in certificate tracking duties, it can be a challenge to spot inefficiencies while ensuring all bases are covered. In these cases, the goal is to make sure your organization avoids major liability or monetary loss.
7. Multi-Tasking Can Lead to Mistakes
Multiple calls to collect the COI make it difficult to review any associated documentation to assure compliance. On top of that, manually contacting multiple insureds for several reasons leads to mistakes in recording and determining which requirements are already met and where they need updates.
8. Internal Communications
Internal communication is almost impossible when leaning on just paper. Communicating with all the contractors, vendors, and other members of the team while collecting and reviewing certificates is a complex communications task for one person to handle. Easily communicate with multiple employees and keep everyone on the same page with cloud-based software.
As you can see, the main risk is missing a step while tracking COIs and ensuring compliance. If you skip just one of these steps or complete it partially, it can result in major consequences for your organization.
Why COI Tracking Is Important in Property Management
If you or your team are manually tracking COIs, you are traveling the hardest road and finding bumps along the way. Without a doubt, tracking COIs for third parties and tenants is the most effective form of risk management there is. You just need to make sure your tracking and monitoring system is effective and accurate.
To help you make the right decision, here are the most important benefits that you will experience by using COI tracking software:
Benefits of COI Tracking Software
- Improved Claims Resolution: If it is clear who is responsible for a claim that arises, it makes resolving it a lot easier. When the right insurance coverage is in place, this is beneficial to tenants and property managers because neither party will have the full financial burden of paying for damages.
- Proactive Protection: COI tracking helps you determine where there are lapses in coverage before a claim arises. By doing this, you can assure you will not have to pay the cost of damages. Also, requiring your tenants to have updated insurance policies will help lower your general liability insurance premiums.
- Find Areas to Improve: When correctly tracking COIs, you can easily find where to improve your tenant compliance. Using a certificate management tool that visually shows where compliance is met and where it needs improvement, allows finding tenants who do not have adequate coverage.
SmartCompliance Assures Accurate Insurance Tracking
SmartCompliance provides the ultimate solution for tracking certificates of insurance. Use our self-service solution to utilize our powerful software and easily keep renters in compliance. Or, if you prefer, pass off the entire process to our team of qualified insurance professionals with our full-service offering. Only focus on running your business while we take over the entire compliance process for you.
No matter which offer is more suited to your organization, we can help you improve compliance. To learn more about SmartCompliance and how we will help your property management business increase compliance, sign up for a free product demo.
