Insurance producers face increasing challenges in the commercial insurance space, and one of the most overlooked areas is contract review and risk management. Many producers either shy away from reviewing contracts—thinking it falls solely within the domain of attorneys—or they handle it improperly, which can leave their clients vulnerable to uninsured losses, legal disputes, and contract violations.
Contract review is not just a legal formality; it is a critical component of effective risk management and insurance compliance. Producers who understand contractual risk transfer can differentiate themselves in the marketplace, improve client retention, and increase revenue.
This article explores why contract review is essential, the common mistakes producers make, how AI and technology can assist in streamlining the process, and how producers can leverage this knowledge to become trusted advisors rather than just policy salespeople.
Too often, insurance producers focus solely on writing policies without considering how their clients’ contracts impact coverage. However, contracts dictate the insurance requirements, liability assumptions, and risk transfer mechanisms that directly affect the insurability of a business.
Failing to review a client’s contracts can lead to:
Many producers assume that standard insurance policy language automatically aligns with contractual obligations, but this is rarely the case. If your client unknowingly agrees to higher liability limits or exclusions not covered by their policies, they could be in breach of contract—or worse, financially devastated by an uncovered claim.
Insurance producers who take the time to educate their clients on contract review are more than just policy sellers—they become risk advisors. By ensuring their clients comply with insurance requirements and transfer risk properly, producers help them avoid costly claims, lawsuits, and business disruptions.
With the rise of hard market conditions in commercial insurance, clients are actively seeking advisors who can help them reduce total cost of risk. Understanding contract review is one of the most effective ways to provide that value.
One of the biggest mistakes in contract review is misunderstanding additional insured endorsements. Many producers assume that blanket additional insured endorsements automatically satisfy contract requirements, but not all endorsements provide equal coverage.
The most commonly required endorsements, CG 2010 (ongoing operations) and CG 2037 (completed operations), require that the named insured be actively performing work for the additional insured at the time of the loss. This can create coverage gaps, leaving the additional insured without protection in cases where the work has been completed.
Better alternatives include the CG 2038 and CG 2040 endorsements, which provide broader coverage without requiring direct work to trigger the additional insured status.
Contracts often include indemnity clauses requiring a party to assume the liability of another. While many standard CGL policies provide contractual liability coverage, certain endorsements may restrict or eliminate this coverage, leaving clients financially responsible for claims they thought were insured.
To avoid this:
Many businesses assume that simply obtaining a certificate of insurance (COI) from a subcontractor or vendor ensures compliance with contract requirements. However, COIs do not guarantee coverage—they are only informational and can be fraudulent or misleading.
To ensure compliance:
Clients who rely on subcontractors must ensure that their insurance coverage aligns with contractual obligations. Many general liability policies now include subcontractor warranty endorsements, requiring general contractors to verify the insurance status of all subcontractors—or risk losing coverage entirely.
Failure to do so could result in:
Insurance producers who master contract review can position themselves as trusted risk advisors, rather than commodity brokers. Here’s how:
Clients want advisors who bring value beyond placing coverage. By offering contract review consulting, producers can help clients:
By implementing contractual risk transfer strategies, producers can help clients:
Most business owners are unaware of how their contracts affect their insurance. Producers who take the time to educate their clients on indemnification, additional insured status, and compliance requirements will build stronger relationships and win more business.
Artificial Intelligence (AI) is transforming how producers handle contract compliance. Some of the best AI tools for insurance compliance can:
Many businesses are now adopting contract lifecycle management software to store, negotiate, and track contract compliance. Producers who understand these tools can integrate insurance compliance features into the client’s risk management strategy.
Step-by-Step Guide for Producers
Insurance producers who embrace contract review and risk management will set themselves apart in the marketplace. The industry is shifting toward consultative selling, where producers who understand risk transfer, compliance, and AI-driven solutions will have a significant competitive advantage.
Next Steps for Producers:
By mastering contract review, producers can transform from policy peddlers to trusted risk advisors, securing larger accounts and building long-term client relationships.
Want to level up your contract review skills? Check out Contract Risk Academy for expert training, tools, and templates to help you master contractual risk transfer and compliance.
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