Shrinking Dollars, Shrinking Cover

Not-for-profit organizations and public entities are in a crunch. A less than robust economy is forcing both privately funded charitable organizations and publicly funded institutions to operate with lowered budgets, despite a growing need for services. And their budget constraints are compounded by the fact that both groups are facing higher insurance costs for many of the same reasons that other lines of insurance are more expensive, as well as for reasons unique to their own situations.

According to USA Today, there are more than 800,000 charities and nonprofit organizations currently operating in the U.S. As staff writer Stewart Eisenhart points out in “Brother, Can You Spare Some Coverage,” the extent to which a nonprofit organization experiences higher costs and lowered limits depends on a number of factors, including its mission, organizational structure, size and the way it conducts its business.

In our “Parting Shots” column, Pamela E. Davis, president of the Nonprofits’ Insurance Alliance of California (NIAC), says agents and brokers can help their clients by finding a market clearly interested in writing this business, and by supplying underwriters with complete and thorough information about the organization to be insured. The necessary information should be provided by the client, but interestingly enough, there are number of services that research nonprofit organizations and make that research available online. Among them:
• GuideStar, www.guidestar.org. Offers financial information and sells detailed reports on charities.
• American Institute of Philanthropy, www.charitywatch.org. Grades charities based on the percentage of contributions used for charity, or for fundraising and administration.
• Charity Navigator, www.charitynavigator.org. Rates charities using financial data and analyzes how efficiently charities operate.
• Wise Giving Alliance, www.give.org. Provides tips on charitable giving and discloses whether an organization meets its standards.

Passage of terrorism insurance backstop legislation may help cities and towns by increasing insurers’ and reinsurers’ appetites for providing coverage for terrorism. Homeland security measures, once finally agreed upon in Congress, will likely boost federal funding for state and local emergency personnel, public health systems and other local programs directly involved in counter-terrorism activities. But while terrorism is a big issue with municipalities and the insurers who provide coverage for them, it certainly isn’t the only one. In “Public Entities: A Specialized Niche,” staff writer Cynthia Beisiegel found that among other issues affecting public entity coverage—such as natural catastrophes, mold in public buildings and violence in schools—one of the most explosive is employment practices liability (EPL), coverage that wasn’t typically part of the public officials liability policy 15 years ago. Employment practices claims have apparently been a loss leader in the public entity sector for a number of years, as they are expensive cases to both defend and settle.

As the old adage goes, the more things change the more they stay the same. While terrorism and EPL may be the current issues du jour, next year or even next month those areas of intense focus today may be relegated to the sidelines. Nevertheless, you can count on the fact that Insurance Journal will continue to report on the developing factors that affect your business.