Guest Author Bio: Shelley Berube has over a decade of experience in fintech and financial services. She currently works as an Account Executive at Jones, helping real estate companies automate their insurance compliance management and de-risk their portfolios.
Managing insurance compliance is rarely a top priority for any real estate company we’ve ever spoken with. Oh, the collective groan we get greeted with whenever we approach a group of real estate execs at an industry conference and say we are about to tell them about insurance compliance management…
But the reality is COI mismanagement can lead to very expensive incidents, especially considering the fact that commercial property premiums have already risen to unprecedented heights. This calls for a tighter, better insurance compliance management process, capable of de-risking your portfolio.
Here at Jones, we’ve worked with hundreds of property management teams (and talked to thousands of them). Below are 10 mistakes our team has observed that are common in the industry. Avoid making them (or fix them!), and your compliance management process will improve 10X.
1. No adequate resources for Property Managers to inform decision making
Reviewing insurance documentation properly requires deep expertise. Checking a date on a COI (certificate of insurance) to make sure it didn’t expire is just the tip of the iceberg.
There is a lot that goes into such an audit, from understanding the anatomy of a COI to knowing multiple endorsement pages and being able to tell property insurance from the property component of general liability.
Here are some of the resources that should be available to anybody who is handling insurance documents:
- A clear and concise overview of key compliance concepts
- Frameworks on how to review COIs and endorsements for compliance (if your company doesn’t provide adequate training, Jones has a free video course on compliance for property managers).
- Company’s guidelines on what gaps could be waived and in what circumstances
- Links that explain compliance gaps and be easily shared with tenants and vendors as guidance.
2. Lack of a clear waiver strategy
In our experience, very few companies actually provide their property management teams with clear guidelines on what should and should not be waived, which is dumbfounding. In a couple of instances, we have had property managers coming to us for advice, which we can not give. As a result, two things happen:
- The property manager waives insurance requirements gaps randomly, as they weren’t given proper guidelines on the appropriate risk tolerance for different requirements.
- The property manager is being too strict and keeps asking vendors for coverage that is not applicable to their business (like Cyber Liability coverage, which is not applicable to any company that does not handle sensitive data in the cloud or on electronic devices).
3. Setting unrealistic compliance goals
Here is a real-life example we’ve encountered several times: property management teams are tasked with the goal to achieve 100% compliance across portfolios. Here is what happens next:
- The back-and-forth on vendor COI increases, subsequently delaying projects or
- Property managers start waiving gaps more aggressively, basically playing Russian roulette with their buildings’ risk tolerance.
In reality, chasing 100% insurance compliance is unrealistic and unnecessary.
Our industry struggles with outdated insurance requirements that don’t really contribute much to protecting owners and managers from risk.
4. Failing to set compliance KPIs
This mistake is on the opposite side of the spectrum: one thing that is worse than having an unrealistic goal is having no goal at all for a process like compliance management, which absolutely should be quantifiable. Just as every other operational aspect, compliance management requires a clear strategy and tasks to focus on every 3 to 6 months.
Here are some examples:
Situation: High number of records with no COIs on file
Goal: Increase the number of tenants’ insurance documents by 15%
Situation: High number of non-compliant COIs
Goal: improve compliance rate for the most important requirements
Situation: High number of expired COIs on file
Goal: Send a request for updated COIs at least 1 month in advance for all records
5. No compliance data research and follow-up plan
This is the most strategic part of insurance compliance and yet, we see a lot of property management teams missing this critical part. Here at Jones, we believe that your compliance data (e.g. collection rate, overall compliance rate, % of expired COIs, and gaps per insurance policy) needs to inform what your insurance requirements should be—the same like your past quarter’s performance is what you base your future forecasts on.
Here is some of the research we recommend to our customers:
- Review your insurance requirements and get rid of the ones that don’t serve your building.
- Regularly check your overall compliance stats and compare your portfolio’s average numbers to individual property’s numbers to spot trends or inefficiencies.
For example, one property might have a higher percentage of expired COIs or your whole portfolio might have a high ratio of waived records for a particular insurance requirement. The first case points to a potential problem. The second one calls for a requirement review—if it ends up waived a lot, do you even need it?
6. Failing to manage tenant expectations
Here are some things we recommend communicating to tenants:
- Any changes in the process, such as new software, or new COI request emails that look differently
- Seasonal fluctuations that might impact tenants’ experience, for example, longer vendor approval times in months when your team is dealing with a high volume of expired COIs.
7. Making the compliance process unfriendly for vendors
An easier compliance verification process for vendors means faster projects and happier tenants. Here are some of the general pointers on how to make the process easier for vendors:
- COI submission flow
If you require vendors to log into any kind of portal to submit documents, some of them will drop out of the process. - Gap resolution
If the COI is non-compliant and you need a vendor to resolve gaps in coverage, be as specific as possible on what exactly is missing and what they need to do to resolve it. Links to resources go a long way.
8. Lack of proactive communication with your insurance broker
The ReShield team wrote the whole blog post on this subject: How to Maximize Your Relationship with Your Insurance Broker.
When it comes to insurance compliance management, being proactive in building a standing relationship with your insurance broker is key: treat your insurance broker as a partner so that your policies (both insurance and other mitigation tactics) actually fit your portfolio’s needs.
9. Manual compliance management process
Full disclosure—helping real estate companies to turn manual compliance management into a fully automated one is what Jones does for a living.
However, we are not the only solution available, and there are certainly ways to automate at least some parts of your insurance compliance management in-house if you are not ready to invest in a tool.
Here are some pointers:
- If your team is still managing your COIs through spreadsheets and binders, you are playing with fire and assuming way more risk than you think you do.
- You need to have a plan to get on top of COIs that are set to expire, like automated emails that get triggered by expiration dates.
- If you prefer to review insurance documentation in-house, consider speed and accuracy. Your COI audit times should not exceed several hours and the team that is doing the audit needs to be properly trained. If you are not 100% confident in your team’s speed and insurance expertise, you need to implement compliance software.
10. Failing to integrate compliance data with your other data sources into one source of truth
This last mistake is more of a general data and housekeeping issue. However, this is something that we at Jones have observed in a number of real estate companies. They keep their compliance data siloed and separated from the main software they use.
As a result, the team spends hours every week importing and exporting data manually from one source to the other. The end result is always project and/or payment delays and, subsequently, upset tenants.
Have you detected any of the mistakes above in your insurance compliance management process? The good news is that most of them are easy to fix even for small property management teams. Even minor adjustments, like providing better training for property managers or being more strategic with data, can significantly improve your overall compliance rate.
Jones is a compliance solution for real estate and construction companies.
Questions about best practices of compliance management? Get in touch with Shelley Berube on LinkedIn: https://www.linkedin.com/in/shelleyberube/
If you’re interested in learning more about your commercial insurance options, please visit our Contact Us page. We’re here to help!