The non-profit insurance space has been in a hard market since the third quarter of 2019. For some non-profits, the concept of a hard market might seem academic, but it has practical implications.
In a hard market carriers began to increase premiums and limit coverages. It is important to remember that carriers are businesses. They must prioritize their profitability and risk exposures in order to serve the greater good. Several factors including social inflation, economic uncertainty and changes in legislation, such as New York’s Child Victims Act, have all contributed to the number and cost of claims carriers must process. To avoid impacting their long-term profitability, carriers must respond by raising prices and limiting coverages in high-risk situations.
For now, the hard market is the status quo. However, there are steps insureds can take with their insurance agent or broker to ensure they have the best coverage at the best price, now and in the future when the market eventually softens:
1. Identify loss drivers: Figure out where the organization is seeing the most losses or highest probability for a loss. Perhaps a specific facility is prone to more slip and fall claims while another struggles with large auto fleet claims. Knowing where the organization is vulnerable is a vital first line of defense to understanding the problem and then making a plan to address it.
2. Strategize, implement and adjust: Consider what mitigation strategies the organization can implement to limit its existing risks. For example, if slip and fall claims are an issue, exploring solutions like no-slip vinyl flooring may help. In some cases, a mitigation strategy may need to be adjusted after it is put into practice. If existing efforts to reduce risk are not moving the needle, strategize with a trusted insurance agent or broker who might be able offer valuable risk mitigation ideas that apply to the situation at hand.
3. Document: Record all the data that comes out of these strategy planning efforts including when they were implemented and how they’ve impacted the organization. Highlight the successes. Having a comprehensives analysis of an organization’s risk mitigation strategy will help a carrier understand what risk they are assuming if they provide coverage. It can potentially help the organization secure lower premiums, as the carrier will be more familiar with the organization’s nuances.
4. Be ready for renewal: It is key to begin this process well before renewal time. As carriers are experiencing an increase in claims, they may require more time to underwrite policies. Organizations that implement risk mitigation strategies and provide value prior to renewal time will better their chances for preferable renewal outcomes.
No one can predict when the insurance market will soften, however it is possible the insurance industry might experience a pause in premiums in late 2022 into 2023. Some pockets of the market could even see a slight reduction in premiums. No matter where the market sits, prioritizing risk mitigation is the best way for nonprofits to protect themselves now and set themselves up for later success when the market shifts, insurance coverage becomes easier to secure and premiums lower.