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Simple Approach in Certificate Tracking

Insurance certificate tracking is a critical problem common to public and private entities. Coverage frequently expires during the term of the contract, and it is often no one's priority to track expiring insurance coverage. In the past, Multnomah County, Oregon's largest county by population, relied on a strategy employed by many public and private entities: ignoring the problem and hoping that all contractors complied with the terms and conditions of their contract regarding indemnification and insurance. When faced with solving this problem, Multnomah County redesigned its process and leveraged existing technology to create a low-cost, win-win solution that can be easily replicated by other governmental agencies.

Multnomah County has an annual budget of $1.2 billion, of which $400 million is spent annually purchasing goods and services. The majority of these purchases are obtained through approximately 1,100 contracts. The county processes approximately 2,000 insurance certificates per year to manage any potential risk in these contracts.

Within Multnomah County, contracts are largely developed and monitored at the department level as opposed to central purchasing. Before the process change, this meant that insurance certificates were gathered by departments, generally by fax but sometimes through the mail. Certificates were often stored in binders and electronic systems at various locations throughout the county. Since many contractors work with multiple departments, they were forced to provide redundant insurance certificates to different county employees for the same contract period. There was also no process in place to track when a contractor's insurance was about to expire or had expired after the initial contract start date. The situation left the county exposed to millions if not tens of millions of dollars in potential claims and judgments without coverage.

Here's how the process now works: Contractors or their brokers send scanned copies of their insurance certificates to a single email address. Certificates are reviewed for sufficiency by risk management staff, who work with the contractor and/or broker to correct problems with the certificate. Key information is entered into the county's enterprise system, SAP. The certificates are stored in a shared directory accessible as needed by contracting staff across the entire organization. Finally, SAP generates letters to notify contractors with expiring insurance that a new certificate is required. Changes to the coverage during the policy life are automatically forwarded through the insurance mailbox for risk management's immediate attention.

One key feature of the new system is that it utilizes a single, consistent process for contractors and insurance brokers instead of multiple requests from various county staff. This was accomplished by setting up a dedicated email address for insurance certificates that is accessible as view-only by contract preparers throughout the county. The certificates are maintained and monitored by risk management staff. As part of the system's implementation, the risk manager contacted the top 10 (by volume) insurance brokers to explain the new process. They were delighted by this common-sense change.

To track specific insurance requirements for each contract, the county added four fields to each contract record in SAP: Insurance Type (e.g. general liability, etc.), Coverage Start Date, Coverage End Date, and Insurance Carrier. Risk management reviews each certificate as it comes in and enters these four fields into the contract record. IT also created a report that is used to identify coverages that are expiring.

Risk management uses this information to send letters prompting contractors or brokers to send an updated certificate. As insurance coverage is for an annual period, the decision was made to convert to the new system by looking forward (i.e., the certificates expiring next month) rather than backward (i.e., the several thousand expired certificates we began with). This meant that it took 12 months for all the tracked certificates to become current, but it also made the conversion to the new system less daunting for staff involved.

The third component of this system was creation of an alphabetical directory (by contractor) on the county's network to store the electronic copies of insurance certificates. Current and expired certificates are both maintained so that coverage during any part of the period of contract performance is easily determined, and contract staff are able to easily and quickly access the certificates. This has eliminated the problem of duplicate requests made for evidence of coverage.

Creating this new system using existing tools cost Multnomah County almost 70 percent less than the cost of an off-the-shelf solution. The insurance tracking program effectively eliminated the county's liability exposure related to contractors' missing or expired insurance coverage. It also significantly improved our working relationships with contractors and insurance brokers by drastically reducing the number of staff they work with and documents sent. The county has also realized some unanticipated benefits such as: early notification of non-payment of premiums by contractors, improved print clarity of the insurance certificates and reduced paper usage.

About the author

Brian R. Smith, CPPO, PMP, is purchasing manager of Multnomah County, Ore.

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