Are you asking too much of your vendors? No, not the quality of their work, but the insurance limits they carry.
Setting insurance coverage requirements for vendors limits and transfers risk. Effective risk management hedges and reduces your risk exposure to financial losses, litigation and reputation damage, and possible regulatory action depending on your industry. But a business’ intention in setting limits doesn’t always match a vendor’s intention when purchasing insurance.
A business purchases an insurance policy first and foremost to hedge and cover its risk. Often, this can lead to misalignment between their coverage levels and the minimums established by your risk managers. Bringing the two closer increases compliance, contributing to the goal of risk minimization, and improves third-party relationships.
Right-sizing insurance requirements benefit all parties involved. To close the gap between your requirements and vendor’s policies, examine who sets the requirements, what happens when they’re too high, and how to best align with vendors.