Subcontractor Insurance Fraud: Seven Strategies for Fighting Back

February 5, 2020

Are you an insurance fraud ninja? 

Do you understand the enemy? Can you spot scams before they become threats? Do you have stealth moves for evading danger? Can you confidently fight deceptive attacks? 

If your ninja skills could use some work, the myCOI team is here to teach you some new moves. We’ve been honing our fraud-fighting skills for 10 years. By the end of this article, you will be ready to punch, kick, and block subcontractor insurance schemes from hurting your business. 

These are the ways of the insurance fraud ninja. 

Skill #1 – Collect Certificates of Insurance

Ensure you have an active certificate of insurance (COI) from every contract company working on a jobsite or project. This includes both the parties under direct contract as well as those parties under a sub-contract.

Skill #2 – Look for Legitimate Companies

Review the insurer’s name in the upper-right corner of the COI. If the company is unfamiliar, contact your insurance agent or the issuing agent to verify its legitimacy. While you check the name, leverage the myCOI platform or log into and find the insurance company’s rating. Ninja masters typically avoid COI’s from companies with B ratings and below. 

Skill #3 – Spot Fraudulent Forms

Using bogus COI templates online is easy. Authentic forms likely have an “ACORD 25” designation on the lower-left corner of the form. ACORD is the Association for Cooperative Operations Research and Development and sets global standards for the insurance industry. Reputable insurance companies use the ACORD 25 COI form. The document should be typed in one font and the only handwriting should be that of a digital signature. 

Skill #4 – Check for Accurate and Active Coverage

Ensure every COI is issued to the correct company. Accurate spelling and address information is very important. Examine the effective and expiration dates of the coverage and verify the policy is still active with the broker. Track when policies expire and issue proactive communication a minimum of one month in advance to obtain updated insurance information from the subcontractor. 

Skill #5 – Check for Active Coverage…Again

Unfortunately, subcontractors can ask their insurer to generate a COI, provide it to the hiring party for contract compliance, and then cancel the policy the next day. Fight this fraud by creating an active coverage review cadence – before a job starts, every few weeks during a job, before payments get released, and at the end of a project. 

Skill #6 – Request a Copy of the Policy

Fraudulent COIs are only half the battle. Insurance companies can rescind coverage from clients misrepresenting information during the underwriting process. This is bad news for an additional insured. The endorsement is nullified and most likely only the named insured is notified of the cancellation. Request a copy of the subcontractor’s policy to verify information is accurate regarding the contracted work. Match the COI to the detail of the endorsements for an added level of scrutiny. 

Skill #7 – Create Contract Protections

Write stipulations into the contract that allow for the withholding of payment to contractors for fraudulent or inactive insurance coverage. This applies to both direct contractors and their subcontractors. If they want to get paid, they must keep themselves and the hiring company protected – period. 

Alright new insurance fraud ninjas, attack!

Previous Page Next Page
This field is for validation purposes and should be left unchanged.

Search by Category

Construction Risk Management
C​ontractors General Liability Insurance
What Is An ACORD 28?
Can You Spot a Fraudulent COI? It’s Harder Than You Think.
ACORD 27 Form
You Must Verify Insurance Compliance More Than Once a Year
Contractor Proof of Insurance: Why It’s Important To Get It
Commercial Insurance Certificate: Everything You Need To Know
Subcontractor Insurance Requirements & Types of Insurance Needed