Managing Nonprofit Business in a Hard Insurance Market

Like all industries, the nonprofit and human service sector has been experiencing a hard insurance market for the past few years due to several factors ranging from new laws to changing statues of limitations to overall economic uncertainty. We get it – insurance and reinsurance carriers need to prioritize their profitability and risk exposures in order to serve the greater good. And to avoid impacting their long-term profitability, carriers must respond by raising prices and limiting coverages in high-risk situations.

But how does this impact nonprofit and human service organizations who already face a significant amount of risk partially due to the vulnerable populations they serve? During a hardened market, nonprofit decision makers may feel powerless, but with the right broker and carrier relationships, they can assert more control by better understanding their options and preparing for potential challenges.

When working with your nonprofit and human service clients, consider the following strategies to help reduce any adverse effect during a hard market while maintaining the best coverage – and price.

• Work directly with a specialized underwriter. You want to be on the same page with a specialty underwriter that knows the industry
• Review coverages, limits and exposures. Weigh the risk of each and decide if any changes should be made to the existing policy as a result of any new risks or operational changes.
• Make sure the insured organization is aware of any restrictions that a carrier may try to incorporate into the new insurance policy, which could result in a gap in coverage or significant exposure based on the organization’s inherent risk.
• Identify loss drivers. Figure out where the organization is seeing the most losses or highest probability for a loss during the hard market. E&S markets may add needed flexibility.
• Increase deductibles. One of the most common strategies organizations take to withstand the hard market is to increase insurance deductibles which works well in lower risk lines. While this could hurt an organization’s cash flow in a year with multiple claims, the benefit of lower premiums may outweigh that risk.
• Discuss new and alternative ways to manage risk internally from safety training to winter weather preparedness.
• Compare insurance limits with those of comparable organizations, operations and budgets before making any big changes. To have a benchmark, nonprofit leadership should ask their brokers to provide an industry comparison of their insurance limits. 
• Prepare for the renewal process a little earlier than usual. During the hard market, it is key to begin this process well before renewal time. As carriers are experiencing an increase in activity and may require more time to underwrite policies.

While most hard markets last 18 months, the current market is entering its 4th year with many industry experts predicting an extended market if interest rates remain high. It’s difficult to predict when it will soften despite our best guesses. But clients that implement risk mitigation strategies and help to show proactive steps prior to renewal time will better their chances for preferable renewal outcomes.

If you’d like to discuss the appropriate coverages to protect your nonprofit and human service clients, as well as habitational and real estate risks in varying market conditions, our highly specialized underwriters at Convelo have the experience and expertise to help you anticipate your clients’ needs, win their business and keep it.

Find out how you can secure access to the best insurance products at the right price today.