Benchmarking in Education: A Useful Tool for Rough Market Conditions

Benchmarking in Education: A Useful Tool for Rough Market Conditions
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Insurance purchasing decisions are often made without adequate data to compare potential purchases with peer institutions. A benchmark report can offer institutions access to this data and many other critical data points by surveying like-minded institutions on various issues and uncovering how they tackle them. 

In this write-up, we will look at some of the issues benchmarking may help address and offer a word of caution when utilizing this vital tool.

Why Benchmarking?

In a normal insurance marketplace, where rates aren't rising each quarter, benchmarking may not be needed or requested as frequently. However, the hard market conditions we are currently experiencing for liability in higher education have made this tool more critical than ever. When premiums are cheap, many organizations tend to over-insure since the cost of higher limits is easily absorbed into the budget. When premiums increase, budget becomes a significant factor. Your institution should consider re-engaging with your finance committee or board to discuss important issues such as your reputational risk, balance sheet and how much risk you can mitigate through risk management. Establishing your institutions' risk tolerance for identified risks is an essential factor when evaluating limits of liability. 

After these discussions, you can combine your team's findings with benchmarking data to make an informed, data-driven decision.

Know the Limitations

While benchmarking is an extremely useful decision-making tool, it is critical to remember a few points of caution when utilizing this data. 
Every situation and institution is unique. While benchmarking can significantly benefit and aid in your school's decision-making process, it is only a part of the equation. It is important to utilize other resources to make a decision tailored to your situation.

For example, a private liberal arts school in the northeast likely has very little interest in the limits purchased by a large public university and vice versa.  An institution with a $400 million endowment might have a higher risk tolerance or absorb a higher retention than a school with a $40 million endowment. Finally, while there are common exposures within each segment of education, there are always unique exposures (academic programs, geography {litigation environment in a particular jurisdiction}, fleet size, employee count, athletic division, international exposure, etc.) that need to be considered when evaluating the "right" limit.

With all this in mind, it is important to remember that the utilization of benchmark reports is most effective with an experienced broker at your side. Your broker can help you decipher what benchmarking data means and how it is relevant for your institution. In short, a broker acting as your trusted advisor can help you maximize the benefits of benchmarking reports and utilize them to their full potential.

Questions? 

RCM&D's Education Practice has extensive experience helping clients break down benchmark reports and use them to make the best possible insurance purchasing decisions. Talk to a trusted advisor for more on this helpful tool and how it can benefit your institution. 

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