COI Crunch:

The COI Crunch

You book a job, excited to have landed another opportunity to grow your small business. Then you get an email, or you arrive on site, and the vendor or person who hired you asks for your proof of insurance. More specifically, they might ask for a COI – a Certificate of Insurance. Chances are, if this requirement wasn’t presented up front, you’re panicking. Why do they need coverage? Can I get coverage fast? How expensive will my coverage be – will this job still be profitable? Will I be locked into an annual policy just for this one job?

Over the years, larger companies, landlords, and venues have begun pushing risk down the chain to their vendors and gig workers. This transfers the burden of liability to the worker or vendor, a business strategy that has become popular as a method for reducing risk and operating costs. As a result, proof of coverage is becoming a standard now for even small jobs and gig workers.

What the heck is a COI?

A COI, or a Certificate of Insurance, is typically a one-page summary that proves and outlines coverage – it is not the policy itself, nor is it a complete description of all policy terms and conditions, but rather a confirmation that coverage exists. The COI is output you can access after you purchase your policy. In some cases, carriers can provide them immediately in the palm of your hand (with your smartphone via an app). Typically, a standard COI outlines several important key pieces of information that companies, landlords and venues may be looking for:

• Coverage limits
  • The maximum dollar amounts your policy applicable for each coverage type.
• Covered entities
  • Named insureds
• Coverage effective dates
  • The start and end dates showing that coverage is active.
• Coverage types and carrier information
  • Types of insurance coverage (i.e. general liability, professional liability, commercial auto, etc.)
• Property insured (on certain policies)
  • Premises location
  • Equipment scheduled
• Certificate holder
  • The name and address of the 3rd party who is requesting proof (like the company, landlord or vendor)
• Authorized representative signature
  • The digital sign-off from the authorized representative of insurance company issuing the document.

A Growing Demand for COIs

Certain industries and professions are seeing an increasing demand to show their proof of insurance in the form of a COI before being able to begin a job more than others. The most common requesters are landlords, venues, general contractors, or corporate clients.

This demand influences which types of small businesses tend to request or initiate a same-day policy. Formerly, they may have been used to operating without insurance or operating in an under-insured manner (we outline a few reasons this happens in the next section). Then, as landlords, venues, contractors and clients begin to mandate specific coverages more often, these same business owners may decide to make the last-minute decision to commit to purchasing a policy due to the new requirements that they are faced with to keep growing their business.

To discern where the external demand for COIs is coming from, Thimble takes a hard look at their insureds and the types of small businesses that have major increases in the demand for policies that start same-day and next-day. Two major areas have seen meaningful increases:

• Home and property trades: interior painting, landscaping, tree trimming, janitorial, and housekeeping
• Entertainment: events like festivals and holiday parties, plus caricature artists and speakers

When it comes to commercial general liability coverage, interior painting nearly doubled in demand for same-day and next-day policies, with landscaping as a close second. Interestingly, demand for same- and next-day policies for caricature artists was the next highest.

Thimble also saw interesting increases in demand for certain special event general liability policies, from festivals to holiday parties, art shows, and more.

Interestingly, this urgency trend is not across the board for all small business types. According to Thimble’s data, some categories trended the other way: beauticians, dance events, vendors not selling food or beverages, and caterers all experienced increase in volume of total policies but not an increase in demand for same-day or next-day policies.

Where small businesses get tripped up

Needing proof of coverage in order to start a job can stifle some small business owners. There are several common reasons this happens.

• Don’t have a lot of cashflow
• Assuming personal or homeowner’s insurance covers business operations
• Unable to get approved for coverage limits that fall below what the contract requires
• Missing additional insured endorsement to the policy, which means the coverage gets rejected by the client
• Waiting until the deadline to prove that coverage is in force, thus losing the job

Practical guidance for business owners

• Ask for insurance requirements before you quote the job so you know if your existing coverage will suffice, or if you’ll need to purchase more coverage, adjust limits, add additional insureds, any wavier of subrogation, etc.
• Know that coverage can usually be matched to the work, whether that’s per job or per month rather than a full year, which you can usually pay in installments.
• Keep a current COI ready to send.
• A COI does not include all the policy terms, limitations and conditions, so it is important that you review the actual policy to understand your coverage.

The bigger picture: it’s not just about your COI

Think of your proof of insurance as a credibility signal and not just red tape. The businesses that are ready earn the work, which is a win-win for business owners. The increased demand to prove your coverage is active and adequate benefits the business, too, because commercial insurance is meant to help protect businesses who need a safety net, especially as they grow. When you have an active policy, your COI can help increase your opportunities to win jobs, so you stop missing out.