CertainCert Insurance Certificate Management Blog

Franchisee Essential Insurance Certificate Compliance Considerations

Franchises have special risk transfer needs and care should be taken to ensure that everyone is protected as they intend to be.  The essential questions are:

1. Who is protecting whom?
2. What protection is desired?
3. How is that protection evaluated?
4. What are your procedures to follow up when deficiencies arise?
5. Who is verifying compliance? (in-house or out-sourced)

Cost and ease of use are factors, but scope and quality are also essential.  Ignoring or avoiding the problem is no solution. Whether you choose to go it alone, use insurance certificate compliance software, use an internet based insurance certificate compliance tool, or outsource insurance certificate compliance to your insurance broker or a third party, find a comprehensive solution that will work best for you.

Depending on the franchise business, there are many risks including:  master franchisor to the franchisees;  franchisees to the master franchisor; and,  vendors to both the master franchisor and separately to franchisees.  As the master franchiser, it is important that you due the due diligence regarding these risks and steer compliance based on your risk assessments.  Your insurance broker is an essential partner in this process.  Once you have evaluated your risks and risk expectations your contracts, follow up correspondence and other materials should uniformly reflect your expectations.  Your franchisees may be new to business and will rely on you to help guide them. 

If you are a master franchisor, it is likely that you have a wide variety of franchise and vendor agreements so it is advisable that you prepare a separate risk profile for each   type of franchisee and vendor you do business with.  You may require only limited amounts of insurance for new franchisees, but require significantly more insurance from larger franchisees and/or franchisees that have sub franchisees.  Likewise, you will likely have specific insurance requirements for construction contractors and subcontractors that will be different from the insurance agreements you have from vendors or suppliers.

While some may elect to have a simple excel spreadsheet or access database, such simple homemade solutions are unlikely to be robust enough to highlight more than vendor names and policy expiration dates.  This is also generally true of accounting software tools that link insurance certificate compliance with payment.  These ad hoc organizing tools generally have no facility to help automate your follow up correspondence for new certificates, renewal certificates and deficient certificates.  There are many insurance certificate tracking software solutions available that can help you navigate the essential and more complex issues of:

1. Insurance Carrier Quality
2. Differing Expiration Dates
3. Additional Insured Endorsements (Blanket or Scheduled)
4. Waivers of Subrogation
5. Notice of Cancellation

Insurance certificate tracking software may be enterprise based or on the web.  Either way, most solutions have way more capability than any system you can create on your own.  Both types of systems will have comprehensive follow up procedures that will ensure that you will get precisely what you want or actionable information for you to pursue those that do not or cannot give you what you want.

The final consideration is whether you intend to do insurance certificate compliance in-house or outsource it.  This is a subject for a future post.