BALANCING RISK AND THE RISING COST OF INSURANCE COVERAGE FOR NONPROFITS
How Nonprofits Can Navigate a Hardening Insurance Market
As a new decade unfolds with new changes and challenges for businesses across industries, nonprofits are no exception. Signs of disruption for the nonprofit sector insurance world are unfolding like they are across all other sectors. However, how nonprofits respond to these changes can be even more challenging than other organizations as you aim to balance the increased cost of operations, especially the cost of risk, with the amount that goes towards your mission.
Coverage Challenges Facing Nonprofits
- Hardening Insurance Market Across Industries – Nonprofit insurance buyers have enjoyed a soft marketplace for years, but unfortunately, the market is hardening. Due to this change, nonprofit leaders now face tough choices regarding insurance, making it all the more important to know what to expect during a hardening market and how to respond in a way that drives the mission forward, while protecting against critical risk factors.
- Lack of Providers Who Specialize in Nonprofits – As any business evaluates insurance coverage, it is extremely important to have a broker who understands your specific needs and industry nuances. For nonprofits, this is especially important because the range of coverage and the need for businesses is so wide. Agents need to thoroughly understand the services provided, types of clients the nonprofits serve and be able to clearly articulate their story to the underwriter.
- Obligation to Have Specific Protections in Place – More than almost any other sector, nonprofits face a sea of coverage options and are often under obligation contractually to have certain protections in place due to the nature of their operation and clients they serve. As costs for these protections rise, many nonprofits may not be able to afford the coverage they need and as a result, their entire mission is threatened.
Areas of Coverage Impacting Nonprofits the Hardest
While all nonprofits will need to evaluate their coverage and, in some cases, make some difficult decisions about budget and risk protections, there are some areas of coverage for which nonprofits are seeing more challenges.
- Abuse or Molestation Coverage – Impacts from the #MeToo movement and more news coverage around sexual abuse has caused some carriers to rethink coverage offerings and in many cases increase premiums or place limits on what they’ll offer within a given timeframe.
- Director’s & Officers / Employment Practices Liability – Layoffs during the COVID-19 pandemic and the looming recession, could further impact these management liability coverages. It’s expected that many carriers will adjust their appetite and underwriting guidelines. Carriers will likely continue to increase rates and retentions, while reducing coverage and offering lower sub-limits in certain states.
- Auto and Property Liability – Nonprofits with large auto fleets will see umbrella pricing increase dramatically, while property and liability coverage rates continue to rise, challenging the slim budgets of most nonprofits.
What Nonprofits Can Do to Get Ahead of the Hardening Market
Even the most prepared nonprofits will need to adapt to the hard insurance market. Businesses can expect to face higher premiums, lengthier and more scrutinizing underwriting process, increased coverage restrictions, and conditional or non-renewal notices. The following are some business strategies to consider to help navigate through the hard market:
- Review Your Existing Insurance Coverage – To prepare for changes, check that your policies account for your nonprofit’s greatest needs. A thorough understanding of your insurance coverage ensures you’re covering your bases where you need to, but not overspending in the areas that aren’t as crucial for your nonprofit.
- Budget for Increased Insurance Costs – While nonprofits will benefit from reviewing existing insurance programs and finding the right partners who specialize in their areas of need, some increases in premiums should be expected. Nonprofits should take increasing insurance costs into account when budgeting alongside other normal expenses.
- Adjust Your Tolerance for Risk – With higher premiums on the rise, it might not be feasible for your nonprofit to maintain the same level of coverage. Consider which areas you’re more willing to risk having lighter coverage and cut costs where you can. Your insurance broker can help review existing policies and procedures and provide suggestions on ways to secure new quotes as you adjust your risk plan.
- Find Specialists for Each of Their Insurance Needs – During a hardening insurance market, it’s especially critical to have an insurance broker who specializes in nonprofit sector needs. Find a broker who understands the types of clients you serve and is able to clearly articulate your needs to the underwriter.
- Communicate With Your Insurance Broker Early and Often. Starting the renewal process early can give your broker more time to secure the best coverage for your nonprofit.
Work With Your Insurance Broker to Help Navigate a Balance of Affordable Coverage for Your Nonprofit
During a hard market, nonprofits should plan to face difficult decisions regarding their insurance coverage. Nonprofit experts agree that what leaders need are agents who specialize in their specific insurance needs and can help them navigate a hardening market with limited coverage availability. Work with your insurance broker to determine your options and how you can get the coverage you need at a price you can afford. Contact INSURICA to get in touch with one of our nonprofit specialists.