Before I dive into the importance of insurance tracking I feel it’s important to understand my long history in construction since; I feel it’s extremely relevant to the topic of compliance.

I am a self-proclaimed construction nerd.  I love construction, the construction industry and most of all, the diverse group of people and companies that make up this amazing sector in our economy.  I caught the bug early on when I started framing housing while still going to high school. While that experience was fun and I was making good money it was not the career I wanted. 

Realizing I needed a degree in order to enter the large commercial market I traded my nail bags for a pencil (computers were not mainstream yet) and I earned a B.S. in Construction Management from Cal Poly San Luis Obispo and immediately went to work for one of the largest commercial general contractors in the nation. Over the next 10 years I graduated up the construction ladder from Project Engineer to a senior level Project Manager. 

While I loved the projects I was working on I understood that I wanted to spend less time on a freeway and more time at home so I made my way back up to San Luis Obispo where I was fortunate enough to work for a publicly traded home building company.  I was running all the land development and I was definitely not on a freeway very much at all.  After 6 years Wall Street decided our small division didn’t check all the boxes needed for a public company and we closed our successful branch.  So what is the next logical step for a well seasoned construction professional?  Start your own company. 

With a business partner we started our own general contracting company and grew it to a $35M/ year company in just 6 short years.  This is when I became passionate about technology in construction.  I started to question how and why we do everything we do on a day to day basis. 

I’m not saying we need to stop, but it seems like there has to be a better way. I knew I needed to find a way to help change this industry for the better.  

So why the back story? We are about to talk about insurance tracking in construction – exciting I know – but this is a process that affects many people and roles in a company. 

I have been fortunate to have been in all of those rolls which gives me an unique understanding of this important part of our industry as a whole but also how it impacts the day to day operations of individuals.  And let’s be honest.. Insurance verification and tracking is mission critical to the success of a company but for many companies it doesn’t seem to get the attention it deserves.  

Simply signing a contract is not enough to protect you.  Every project requires insurance and we know we must diligently track those certificates. 

But why do we painstakingly put all those names and policy expiration dates into a tracking system.  To minimize the transfer of risk.   But what exactly does that mean?  When a subcontractor or vendor issues you a COI – naming you (and others) as additionally insured – you are holding evidence that they have insurance to cover any costs arising from issues on a project. 

If this COI is not accurate or current all of the risk is transferred to your policy.  In simple terms, your insurance policy is now covering any costs related to accidents or defects on the project.  

Based on our research there are 2 pain points in this process.

  • Verification.  Is the person reviewing the COI qualified or diligent enough to accurately verify it meets all the requirements of the project.
  • Tracking. Once the COI is verified it has to be proactively tracked to ensure the same COI is issued annually prior to the policy expiring.

Sadly in 2021 insurance is still managed in outdated systems that most likely are putting your company at risk.  Simply entering data into a spreadsheet or other system not specifically designed for COI tracking does not eliminate risk transfer. 

Conditional formatting with color codes or macros to provide alerts of expiring policies is not an upgrade nor does it do a better job of protecting your company.  I have spent that last few months talking to many companies from all over the country and the majority of them have this same process for tracking insurance:

  • Receive certificate
  • Manually verify it matches project requirements
  • Enter the vendor name, policy number, and expiration dates into excel, accounting software or other non-insurance specific software
  • Repeat above for each policy (auto, workers comp, umbrella & GL)
  • Repeat above for every vendor
  • Track expiration dates to insure policies on projects don’t expire

Let’s go back to those rolls and see how this process impacts their day to day: 

  • Project Administrator/ Contracts Administrator: Responsible for receiving, validating and entering insurance certificates into that magic excel sheet. Communicates insurance status to the Field team via email or weekly meetings.
  • Project Engineer: (Depending on company set up) Responsible for receiving, validating and entering insurance certificates into that magic excel sheet. Communicates insurance status to the Field team via email or weekly meetings. All other PE duties.
  • Superintendent: Focused on project schedule and all site activities.  Superintendent must have confidence all vendors/ subcontractors are insured and permitted to be on site so as not to impact schedule. 
  • Project Manager: Focused on project schedule, budget, compliance and company risk. Project manager must coordinate all owner responsibilities as well and insuring the project is being managed properly by the others on the Team.
  • Compliance Officer: Needs to have confidence the vendors and subcontractors are compliant and insurance is being tracked properly.  In short they want to see that excel sheets are being filled out and updated regularly but proactive management is left to those entering data into the spreadsheets.
  • Company Owner:  Manages the risk and growth of the company for the benefit of everyone.  Trusts in their teams to manage budgets, schedules, and risk in a manner that protects the company and in turn helps promote revenue growth.  Is watching long term strength and growth so the company can sustain itself into the future. 

If you look carefully at these rolls you start to understand that those individuals that are most concerned with the impacts of poorly tracked insurance are far removed from the actual tracking and verification of the certificates and policies. 

The executives and owners put all their confidence in the accuracy of the data entered by an admin or PE. Remember, just because data is in a software does not mean the job is done nor that the data is accurate.  In most instances these current solutions are simple databases and not designed as tracking software. 

It only works as a tracking tool to manage insurance if the person managing the sheet is actively (this means daily) reviewing and updating data, looking for soon to expire certificates or looking for the color coding to point them in the right direction – color coding set up by them in the first place.  If you start to imagine the depth of this you can quickly realize the potential for lapses in coverage and potential for risk transfer.  

For example:

  • 1 construction project = +/- 30 subcontractors
  • 30 subcontractors x 4 policies per subcontractor
  • 2 tiered subs on average per subcontractor
  • 4 policies per tiered subcontractor 
  • This equates to:
    • 90 COI’s to verify
    • 360 Policy dates to enter and track and renew
  • Now imagine you have 5 projects per year (average for a SMB) – thats
    • 450 COI’s to verify
    • 32,400 Policy dates to enter and track and renew

So what’s the downside of not tracking insurance? If a subcontractor’s policy expires and is permitted on site they are no longer insured for that project. 

If an accident were to happen with that subcontractor then all that risk would transfer to you – the Contractor. Out of that 32,400 policies to track it only takes 1 mistake to cost millions. I know – my company was sued for over $8M on a $1.5M project due to a certificate of insurance expiring and the sub was permitted on site. One simple error in managing an excel spreadsheet cost millions.

It’s tedious and time consuming but the downside can be huge.  All contractors need to not just track insurance but take the time to make sure they are using a software or system to track it properly. 

My advice in all this is to not try to have insurance tracking be a side benefit of another software solution, or try to use a spreadsheet that relies heavily on data entry and visual inspection to track something so important.

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