Significant Shortfalls in Third-Party Insurance Coverage Detailed in New Report
Friday, July 9th, 2021
Evident, a leading insurance verification service provider, observed that 75% of third-party vendors fail to comply with enterprise insurance requirements despite being contractually obligated to do so. The findings are highlighted in Evident's "State of Third-Party Insurance Verification" report, which draws on an analysis of tens of thousands of verification records.
Third-party insurance coverage is a critical part of corporate risk management processes. However, research focused on large enterprises revealed that the average company has only 25% of third-parties verified, creating a significant risk of losses from under/uninsured business partners. Evident’s new research report reveals that a variety of issues contribute to the poor performance, including unwieldy and complicated processes, poor communication, overly complex requirements, and the high expense associated with third parties meeting those requirements.
“Companies are challenged to create a program that achieves a high degree of compliance and then keep it up-to-date,” says David Thomas, CEO of Evident, “This hampers their risk management efforts and wastes lots of time and money for enterprises themselves, third parties, insurance brokers, and agents.”
The report shows that on average:
● 75% of third-party vendors do not meet the insurance requirements of the companies that hire them
● 23% (or 1 in 5) of third-party vendors do not respond at all to companies’ requests for proof of insurance
● At least 1 in 10 third-party vendors falls out of compliance without notifying the verifying company
But what does that mean? It means current vendor insurance practices are failing despite significant expense and effort, putting companies at risk for losses and liability in case of a lawsuit against the third party. These suits almost always target the "deep pockets" of the larger company. Without adequate protection, the company can be exposed to untold legal fees regardless of the claim’s merits.
The report shows how complex the current vendor insurance verification process is for brokers and agents. It illustrates principles for better communications, cooperation, and the technology for a solution. Right now, companies are taking chances on three-quarters of the vendor contracts they sign.
The full report can be found here.