Education Outlook: Risk Mitigation Strategies for The Hard Market
The commercial insurance market continues to experience "hard market" conditions with premium increases on many lines, reduced capacity, and enhanced underwriter scrutiny. As schools across the country continue to navigate a challenging admissions season, make decisions around vaccination requirements, and prepare for what we hope is a "normal" fall semester, the hard market conditions couldn't have come at a worse time.
The good news is that several risk mitigation strategies can help an institution fare better in this environment. These methods may include purchasing insurance through a consortium of peers and utilizing other insurance tools like captive programs.
Strength in Numbers: Consortiums
When it comes to finding the right coverages at the right price, a consortium can be an excellent tool for educational institutions. A consortium leverages the collective buying and negotiation power of a group of schools. With the backing of a group, consortiums can offer reduced rates and improved coverages with premier insurers.
Long-term premium stability is another added benefit of consortiums. The leverage of a group can not only help mitigate the effects of the hard market conditions we're currently experiencing, but it can also help reduce the risk and lessen the blow of large claims at a single institution within the consortium.
Additionally, consortiums can offer several other collaborative educational incentives. These incentives include benchmarking reports, educational conferences and webinars, and risk management roundtables to discuss the unique risks within the group.
With all of this in mind, we would like to offer a word of caution regarding consortiums. In our many years of experience, consortiums tend to be more effective and stable when limited to certain geographic regions. In other words, programs offered to schools throughout the entire country are not advisable and tend to offer a "one-size-fits-all" approach, which is not ideal. Consortiums that work with schools in a specific region are not exposed to certain catastrophic perils in other states (i.e., wildfires in California, hurricanes in coastal areas, etc.) or negatively impacted by higher liability costs driven by members in states with plaintiff-friendly courts. Finally, when you focus on a particular geographic location, you work with local underwriters who know your school. Therefore, you are more connected and invested in delivering quality coverage, best-in-class resources, and stable pricing.
Utilizing Captive Programs
As defined by Zurich, Captives or Captive Insurers are insurance companies directly formed, owned, and controlled by the parent organization it insures. The goals of a captive program are greater flexibility and control over the parent organization's risk financing objectives and its insurance and claims costs.
Along with traditional captives consisting of a single organization, group captives comprised of multiple organizations provide an opportunity for middle-market and smaller organizations to utilize these alternative insurance approaches. Captives are a long-term solution and require a detailed analysis of losses, exposures, and risk tolerance. If you are considering a captive, ensure your organization allows sufficient time for due diligence and education on the benefits and risks associated with this risk financing approach.
Advance Planning is Critical
Advance planning and the strategic marketing of accounts will be critical in today's hard market. An experienced broker can help educational institutions by taking every opportunity to "resell" the institution and its risks to underwriters, highlighting several factors that can lead to better rates.
Factors behind this "resell" may include the institution's long-term claim history, a summary of capital improvements that improve property ratings, and information on risk management initiatives at the institution (i.e., enterprise risk management, driving training, safety training, property risk mitigation initiatives such as water intrusion detection or infrared thermography testing, return-to-work programs, etc.) that can reduce the risk of a claim.
Additionally, a knowledgeable broker can help educational institutions navigate consortiums' individualized pros and cons, as well as alternative risk financing options. With a deep understanding of your institution's unique profile, your broker can help you determine the best path forward in this hard marketplace.
The RCM&D Education Practice is here to help you navigate today's difficult market conditions. Our team has recently delivered renewal outcomes far better than market averages. Talk to a trusted advisor today for more on how your institution can stay protected and continue to thrive.