A request for evidence of insurance can hold up a board appointment, a supplier onboarding or an investor close if the business has to start from scratch. A small amount of preparation usually avoids problems.
Say a counterparty asks for evidence of Directors and Officers cover by Friday, and a board appointment, and an investor close depends on it, or perhaps a newly landed enterprise customer asks for Professional Indemnity and Cyber coverage in line with their procurement guidelines. In most cases the cover is straightforward to confirm, modify or arrange. What takes the time is working out what is being asked for and who can sort it at short notice.
These requests tend to arrive in familiar forms. A prospective director may want D&O in place before accepting the appointment. A customer may need to see Professional Indemnity and Cyber cover before onboarding you as a supplier. An event organiser may make Public Liability mandatory for every exhibitor. Each usually comes with little explanation and a deadline that assumes you already hold the cover. These requirements are normal, but the timelines are often unreasonable, and for a business taking on investment, signing larger contracts or commercialising technology, that gap is where momentum gets lost.
Why counterparties ask
Every one of these requests is about transferring risk. A customer wants to know that if your software fails, there is a balance sheet behind the claim other than yours. A director wants protection against personal liability before putting their name to your board. An organiser wants to know that a stand collapse or an injured visitor won’t become its problem.
Understanding the reason behind a request tells you how much room you have to respond. A clause lifted from a procurement template calls for a different conversation to one written around a specific exposure in your contract.
What is often negotiable
Many requests are starting positions. The areas worth examining are usually:
- Limits. A figure that suits a large enterprise supplier may bear no relation to the value of your contract or the exposure it creates.
- Retroactive dates. Professional Indemnity and Cyber are commonly written on a claims-made basis, so the retroactive date determines which past work is covered. Counterparties will often ask about it.
- Endorsements and wording. Requirements to note a counterparty’s interest, extend cover to principals or waive subrogation rights are common, and not every insurer will agree to them as drafted.
Knowing which of these a counterparty genuinely needs and which it has simply copied across from a template, makes the difference between a quick response and a drawn-out one.
Getting ready in advance
Businesses that handle these requests well tend to have already done some of the groundwork. They keep current certificates of currency and policy schedules easy to find, hold a one-page summary of limits, retroactive dates and key exclusions, and have one person who owns the response. They also have a relationship with a specialist who already understands the business.
When a requirement arrives, that specialist should be able to tell you quickly whether the request is reasonable, whether it is insurable, what it will cost, how fast it can be arranged and whether it is worth negotiating rather than accepting as written. With those answers you can shape your response instead of working to someone else’s deadline.
“Founders often treat these requests as a compliance exercise, which is where much of the stress comes from. It helps to ask what the counterparty is actually worried about, because once you answer that, most of the friction tends to disappear.” Charlie Biddulph, Partner at SRG Australia
If a counterparty asked your business for proof of cover this week, how quickly could you respond?
