Risk Administration
What the exam tests
Risk Administration tests implementation and monitoring: who does what, how records are kept, how certificates and contracts are tracked, how claims are managed, and how results are measured and fed back into the process.
Core rules
- A written risk management policy assigns authority, sets retention philosophy, and establishes reporting lines. Without it, decisions become ad hoc.
- Keep records: policies, endorsements, certificates, contracts, loss runs, inspections, training logs, and claim files. Retention schedules matter for litigation and audits.
- Certificate tracking verifies insurance requirements, additional insured status, waivers of subrogation, and expiration dates. A certificate is evidence, not coverage; the endorsement controls.
- Contract review confirms indemnity, insurance limits, notice deadlines, and completion dates before work begins.
- Claims management includes prompt notice, documentation, reserving, return-to-work programs, and subrogation review.
- Renewal administration reconciles exposures, payroll, sales, and vehicle schedules. Premium audits can create additional premium if exposure data was understated.
- Metrics include cost of risk per payroll, revenue, or vehicle; claim frequency; severity; and closure rates.
Worked example
A property manager requires subcontractors to carry $1 million general liability and name the owner as additional insured. The certificate on file shows the required limits but expires in 30 days. Administration should request a new certificate and the actual additional insured endorsement, confirm the waiver of subrogation, and calendar follow-up before expiration. If a claim occurs after expiration and no renewal certificate exists, the owner may be uninsured for that contractor's work. The certificate alone never amended the contractor's policy.
Traps that cost marks
- Treating a certificate of insurance as coverage or as an endorsement.
- Filing certificates without checking additional insured and waiver language.
- Missing premium audit reconciliation for payroll or sales.
- Missing claim notice or contract notice deadlines.
Key points
- A written policy assigns authority and retention philosophy.
- Certificates are evidence; endorsements grant coverage.
- Track expiration dates and contract insurance requirements.
- Reconcile exposure data at renewal and audit.
- Measure cost of risk against a relevant exposure base.