The Importance of Proof of Errors and Omissions Coverage

E&O insurance not only mitigates risks, it helps you pursue sales opportunities. Proof of insurance can be a sales tool for winning more business.

Insurance is one of the most important elements of personal risk management. It protects people’s lives, cars, homes, incomes and more. That means when they suffer a covered loss, their insurer will fulfill its end of the bargain by sending them or their beneficiary a check. But there’s another insurance benefit people often forget about: the ability to show others they’re fully insured.

For example, business owners bidding on projects want their prospects to know they’re financially responsible. They also want them to know their insurer will cover damages if something goes awry. Similarly, insurance agents seeking appointments with insurers or with insurance or financial marketing organizations (IMOs or FMOs) must prove they carry E&O insurance. This gives the entity confidence they won’t be left holding the bag if producers make a costly mistake.

How should business owners prove they have insurance? By obtaining and sharing a document called a certificate of insurance (COI). Insurers and agents typically provide one at the point of sale. But if owners misplace it and need one later to pursue a business opportunity, they can request or download one from their insurer’s website.

What Is a Certificate of Insurance?

A certificate of insurance (COI) is an electronic or hard copy document that demonstrates the business is fully insured, which could be important to their clients. At a minimum, a COI should contain the following information:

• Issue date
• Insurer’s name
• Insured’s name
• Insurance type
• Policy coverage limits (limits of liability)
• Insurance agent’s or broker’s name
• Description of locations, vehicle and operations (often used to list additional insureds)
• Certificate holder (person or company receiving the COI)
• Signature (of agent/broker or authorized representative)

COIs are often issued on a standard industry form called an “ACORD certificate.”  ACORD stands for Association for Cooperative Operations Research and Development. It’s a non-profit group that standardizes insurance-industry forms.

Remind your clients that a COI is not the same as an insurance policy. A COI is a written confirmation that a business owner bought insurance. But a COI does not replace the actual insurance policy, which is an enforceable legal contract. The policy document has much more information about the type and amount of insurance in force and its terms and conditions. If prospective clients want the “full deal” about an insured’s coverage, they should ask to see the full policy.

As an Insurance Agent, When Should You Submit Proof of Insurance?

Providing proof of insurance is necessary when a prospect or colleague is concerned about the risks of working with you. For example, you may have decided to place your life and health insurance policies through an IMO. Before adding you to their producer roster, it will ask to see your E&O COI. Since you’re insured, this means your policy will cover client disputes, not theirs.

At what other times will you need to provide a COI? Here are three important ones:

• When you’re pursuing a high-value job or project. For example, say you’re bidding to provide insurance or a bond for a large construction project. The developer and general contractor will want to know you have E&O insurance in force. Thus, if your professional negligence sparks a dispute that harms the project, your policy will cover it, not theirs. Beyond this assurance, being able to document your insurance protection reflects well on your financial responsibility and ethics. It tells your prospective clients that you will stand behind your work and make things right if anything goes wrong.
• When a prospect is concerned about potential breach of contract. For certain clients, the possibility you might pull out of an engagement can be highly worrisome. Sharing your COI assures them that if you were you to withdraw, insurance will cover any financial losses.
• Encourage clients not to worry about any member of your team getting injured while working for them. By providing clients with a workers’ compensation COI, they will know that if you or one of your employees gets injured, your insurance policy will respond, not theirs.

Risks of Not Providing COIs

Not giving business clients or partners a COI is a risky proposition. Why? Because it sends them troubling messages:

• That you may be uninsured, putting both you and them at risk.
• That you may lack sufficient financial resources to afford insurance, raising questions about your staying power.
• That you don’t care about your clients’ or partners’ risks.
• That you lack the foresight to bring a COI to an important sales meeting.

The point is, not being able to readily supply a COI when asked to raises doubts in the minds of others. This will make it harder for you to close deals. It may even derail them entirely. Prevent this from happening by keeping your E&O in force and providing proof of insurance early in the sales process.

Bottom Line: COI as Sales Accelerant

As an entrepreneur, you know that opportunities can be fleeting. When they arise, you need to respond quickly and decisively before prospects change their minds or competitors emerge. Being able to provide proof of insurance at the top of your sales funnel will increase your closing ratios. Saying “I don’t have a COI” or taking a long time to submit one will create doubt in your prospect’s mind about your competence and reliability.

The importance of providing COIs applies to your clients, too. Just as you need to supply COIs to insurers and IMOs/FMOs in order to write business, your clients need to do the same when they’re trying to pursue new opportunities. Thus, having your COI at the ready will be as crucial for them as it is for you.

Fortunately, the insurance industry has digitized the entire COI process. You will typically receive a digital COI after buying your policy, not a paper proof of insurance. (Note: 360 Coverage Pros emails COIs during its “click and bind” application process. It also lets you enter on your policy application the names of people needing to see your COI. When you submit the form, 360 Coverage Pros will send your COI to your listed contacts via SMS). You can easily download your COI PDF from your insurer’s or agent’s website and print it out on the fly before a client or partner meeting.

Similarly, after buying business insurance from you, clients now can easily access and print their COI when they’re pursuing new business. Given the importance of this function, be sure to explain to them how and where they can access their COI online. Insurers may handle requests differently, so familiarize yourself with each insurer’s procedures.

At the end of the day, having E&O insurance mitigates the risks you and your clients face, while accelerating sales opportunities. Being able to prove you have insurance not only provides peace of mind for you, but also for the clients you serve now and hope to in the future.

Having E&O insurance is an essential part of an insurance agent or broker risk-management program. So is the ability to quickly access your NAPA COI. To learn more about our policy options or to download your COI, visit us online.