NCCI Presumptions Tracker

Below are the latest updates from NCCI regarding state presumptions:

Illinois: (Past by Both Chambers on 5.22.20) HB 2455 In Part, Provides That There is a Rebuttable Presumption That an Employee’s Contraction of COVID-19 Arises Out of and in the Course of the Employee’s First Responder or Frontline Worker Employment and That the Injury or Occupational Disease Shall Be Rebuttably Presumed to Be Causally Connected to the Hazards or Exposures of the Employee’s First Responder or Frontline Worker Employment

Massachusetts: (In Joint Committee) HB 4739 Creates a Presumption of Relatedness for Essential Workers Suffering From COVID-19

Michigan: (In Senate Committee) SB 928 Relates to Infectious Disease Presumption for Essential Employees During a Declared Emergency

Ohio: (Introduced the Below)

HB 667 Makes COVID-19 Contracted by a Corrections Officer an Occupational Disease   Under the Workers Compensation Law

HB 668 Makes Coronavirus Contracted by a Peace Officer, Firefighter, or     Emergency Medical Worker an Occupational Disease Under the Workers Compensation Law

As a reminder, NCCI provides regular updates regarding presumption activity.  To access the tracker, click here.

Stay Safe,

Team Libertate

 

Workers’ Compensation Super Bowl

The National Council of Compensation Insurnce (“NCCI”) hosts their Annual Issues Symposium this afternoon on a shortened and virtual basis.  There is no other conference that influences what happens with workers’ compensation reserving and pricing then this one.

All major carriers and their respective mathematical prophets will be on the line to measure profitability and the components thereof for the last year and historic.  Even more importantly this year, the prediction of go-forward profitability and pricing guidance/trend.

Click to access II_AIS2020-Agenda.pdf

Mr. Donnell starts off at 1:00, State of the Line at 1:15 and Bob Hartwig does a COVID presentation 2-3.  Very much condensed than usual and for the first time that I know of… its free!

We will be summarizing our interpretations of these presentations later in the day but please check out if you have the time.  Hartwig, especially, is a tremendous speaker –

The links below to join…

Plan to join us for NCCI’s Annual Issues Symposium—AIS Virtual<https://www.ncci.com/Articles/Pages/AIS_LiveStream_UserCapture.aspx?aisinvitelinkclick=yes>, May 12, 2020, 1:00 p.m. ET.

AIS Virtual is the premier workers compensation event offering actionable intelligence around the industry’s most relevant issues.

These helpful tips will get you ready:

 

  • For optimal viewing, use Chrome or Firefox and log in early to test your system’s livestreaming capability.

 

  • Log in will be available 15 minutes prior to our start time, and you’ll be able to enjoy our AIS Virtual preshow content as we count down to our 1:00 p.m. ET kickoff.

 

Following the main program, view our interactive Meet the Experts session, and access additional insights via our AIS Virtual Highlights Report on ncci.com.

For more information, and the full AIS Virtual agenda<https://www.ncci.com/Articles/Documents/II_AIS2020-Agenda.pdf>, visit ncci.com<https://www.ncci.com/Articles/Pages/II_AIS2020-Registration.aspx>.

The NCCI Speaks to the Impact of COVID19 on Workers’ Compensation

Following suit with the research brief from WCIRB. Click here to access.

…done last week by the Workers’ Compensation Insurance Rating Bureau of California (“WCIRB”) on the impact of COVID19 on the California Workers’ Compensation system, the National Council of Compensation Insurance (“NCCI”) came out yesterday with the same for the 38 States that it tracks for rule and rate-making purposes. Note the numbers below do not include half the country’s volume of workers’ compensation premiums when it is considered States like California (25% on its own), New York and Ohio are not included in the below data.

Key findings of the NCCI on frequency rates:

  • % of ee’s that will contract COVID 19 on the job – <10% – 81%
    • it should be noted that the issue of “Presumption of Coverage” related to different types of occupations is the driver of the huge range in frequency – all States are presuming “First Responders” (1,176,110 workers), others to include Healthcare Workers and First Responders (9,666,420 workers) and still others such as Illinois that presumes any worker that is client facing has occupational exposure to the disease (86,351,950 total workers in the 38 States considered)
  • Infection rate is 5-50% regardless of class of worker above
  • Range of Impact of CoVid losses on overall expected losses by category of worker:
    • First Responders – PreCoVid expected losses of $1.1B with potential impact of $.1B – $1.9B… 10%-170% range
    • First Responders and Healthcare Workers – Pre CoVid losses of $3B  with potential impact of $1B – $16.2B…. 33% – 550% range
    • All Workers – PreCovid losses of $32.1B with potential impact of $2.78B – $81.5B… 8 – 254% range
    • Hospitalization rate after infection range is 1 – 31%
    • Critical care rate of 5 – 27%
    • Duration of care for mild symptoms of 2 weeks and 3 – 6 for moderate or critical cases
    • Cost per claim type:
      • Mild $1,000
      • Moderate-Severe $25,500
      • Severe $59,000
    • Impact by infection and compensability rates
      • 1% occupationally impacted, cost of loss goes up 8%
      • 5% = 42%
      • 10% = 85% – which at present is NCCI’s selection
    • Fatality rate for those infected with the virus is .5% across all classes of employees – Average impact $146,980 in death benefits (does not include medical)

My summation of what the NCCI and WCIRB are projecting is as followed:

  • The huge range in expected costs is going to be understood on a State by State basis with the issue of presumption of contraction based on occupational duties being the biggest driver
  • As each State has unique payouts for disability and death, the prediction of cost and risk load for pricing needs to be State by State
  • The healthcare segment is providing the most unpredictability – add a risk load, park the business elsewhere or stay out of the segment for now – too unpredictable
  • PEO’s can be a very important partner to insurance carriers by allowing them to understand performance data fastest due to their management of payroll
  • The smartest people I know do not know what to predict but this is a start – we probably will not have enough real data to narrow this range of expectations for months

Stay safe and we will get through this – but with our eyes open.

Regulators and Lawmakers Introducing Workers’ Comp to COVID-19

By Jim Sams, April 20, 2020

Sympathetic state lawmakers and regulators in states both red and blue promise to make COVID-19 a major cost driver for workers’ compensation insurers.

The governors of Kentucky, Arkansas, North Dakota and Florida and state regulators in Illinois, Washington, Michigan and Missouri have issued executive orders or amended rules to expand eligibility for workers’ compensation.

Most of those decrees ease the path for benefits only for healthcare workers and first responders, but an emergency order by the Illinois Workers’ Compensation Commission creates a presumption that work is the cause of COVID-19 if contracted by any “frontline worker” identified in Gov. J.B. Pritzker’s March 20 stay-at-home order. That includes workers at grocery stores, laundries, banks and hardware stores, among other businesses.

Kentucky Gov. Beshear issued a similarly broad executive order that created a COVID-19 presumption for workers in grocery stores, child-care centers, domestic violence shelters and rape crisis centers, in addition to first responders and healthcare workers.

In the meantime state legislators are also pushing to expand benefits for COVID-19. Earlier this month, Alaska Gov. Mike Dunleavy (R), Wisconsin Gov. Tony Evers (D) and Minnesota Gov. Tim Walz (D) signed into law bills that create a COVID-19 presumptions for first responders and some healthcare workers.

Bills to create presumptions for COVID-19 have been introduced in the New York, New Jersey, Pennsylvania, Ohio and Utah state legislatures.

Steamroller

Philadelphia defense attorney Cliff Goldstein said he saw the avalanche of presumption bills coming as soon as heard the first reports of the disease spreading into the United States.

“I don’t think there’s any way to stop that steamroller,” he said.

Data from the California Division of Workers’ Compensation bears him out. As of Thursday, 1,527 claims coded for COVID-19 on claims notices had been filed, according to agency spokeswoman Erika Monterroza.

Goldstein is not the only defense attorney predicting a flood of COVID claims.

“There will likely be many workman compensation claims because of the ease of filing, there is no requirement to prove negligence, and for many people their greatest contact with others, and hence the greatest chance of contracting the virus, is at work,” David Boies, managing partner of Boies Schiller Flexner LLP in New York, told Bloomberg News.

Goldstein said presumption legislation promises to be a boon for claimants’ attorneys, who will take a percentage of any permanent disability benefits awarded.

“You are just dangling meat in front of hungry lions,” he said.

Goldstein said his office — Chartwell Law in Valley Forge — has already received a handful of claims, some of them death claims. He said employers should resist any kind-hearted urge to quickly approve such claims based on the employee’s job category. Instead, each claim must be individually investigated, he said.

COVID-19 claims that require admission to an intensive care unit will likely run into the six figures for medical costs alone, he said. What’s more, employers will be taking full responsibility for whatever complications arise from a coronavirus infection far into the future.

Goldstein said Congress passed a pair of relief bills in March that should make it easier for employers to delay acceptance of a claim. The legislation requires employers with fewer than 500 employees to grant up to 80 hours of sick leave to workers sickened by the new coronavirus, which will be reimbursed with tax credits. Gov. Gavin Newsom issued an executive order Thursday that requires the same benefit from employers with more than 500 workers.

For workers who lose their jobs because of coronavirus, the federal emergency law also allows up to 16 weeks of unemployment insurance benefits at rates ranging from $875 to $1,500 per week, depending on the state, Goldstein said.

Vulnerable Occupations

Claimants’ attorney Julius Young in Oakland, Calif. said those benefits won’t make workers whole. Usually workers lose their health insurance if they lose their job, which makes workers’ comp a vital benefit for employees who were made sick because of their exposure to the public while at work. Also, some workers may be permanently disabled by COVID-19.

He said presumption bills make sense for workers who can’t avoid constant contact with the public.

“A lot of these people in vulnerable occupations shouldn’t have to go through this roulette-like maze wondering whether they are going to be covered,” Young said.

Young said the federal benefits will help in the short-term. He said state regulators should start thinking about whether and how any federal benefits paid can be offset from workers’ compensation awards.

Medical research indicates that there is a real possibility of permanent disability from COVID-19.

According to Science Magazine, the lack of oxygen and widespread inflammation caused by COVID-19 can damage kidneys, liver, heart, brain and other organs. Studies show that severe pneumonia caused by other diseases sometimes lead to scarring that causes long-term breathing problems. Pneumonia also increases the risk of future illnesses, including heart attack, stroke and kidney disease.

In one study of 138 patients hospitalized in Wuhan, China due to pneumonia from COVID-19, 20 percent suffered acute respiratory distress syndrome.

A separate study published by the New England Journal of Medicine in 2011 Regulators and Lawmakers Introducing Workers’ Comp to COVID-19found that of 109 survivors of ARDS, 51% suffered physician-diagnosed depression, anxiety or both. Perhaps more relevant to workers’ comp, that study found that just 77 percent of the 83 patients who survived throughout the study period had returned to work five years after being treated. The study found that only 39% of patients were able to walk the distance expected for their age group in six minutes five years later, suggesting a high degree of physical impairment.

As of yet, none of the major workers’ compensation rating organizations has released any projections on the potential impact of COVID-19 on workers’ comp loss costs.

The National Council of Compensation hopes to release next week an analysis of potential claim costs under a variety of scenarios, said Executive Director Jeff Eddinger. For example, one scenario project costs if a large percentage of workers who contract COVID-19 file claims and 100 percent are found to be compensable. He said the analysis will make projections for a variety of infection and claim-acceptance rates.

Eddinger said NCCI does not yet have any data on how many claims have been filed. He said insurers don’t report their losses until six months after the policy period expires. But he said there is some data available. For example, the Centers for Disease Control and Prevention reported that between 10 percent to 20 percent of COVID-19 cases were healthcare workers.

The California Workers’ Compensation is working on similar projections, said President Alex Swedlow.

 

Want to learn more about how COVID-19 affects your company? Give us a call at 305-495-5173, or email us at sreynolds@libertateins.com.

WCIRB Releases Cost Evaluation of Conclusive COVID-19 Presumption

See below from the WCIRB regarding the projected cost of COVID-19 claims to be filed by ‘Essential Critical Infrastructure Workers’….At the low end, if only 4.8% of California ECI workers file claims related to COVID-19, the cost to the system will be an astounding $2.2B!

—————-

WCIRB Releases Cost Evaluation of Conclusive COVID-19 Presumption

Oakland CA, April 20, 2020 – The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) released its Cost Evaluation of Potential Conclusive COVID-19 Presumption in California Workers’ Compensation. The evaluation was completed in response to an April 8, 2020 request from the California State Assembly Insurance Committee to assess the impact of a conclusive presumption that COVID-19 claims arising from certain front line workers are presumed to be work-related. Specifically, the WCIRB was requested to provide the cost impact of a conclusive COVID-19 presumption for health care workers, firefighters, EMS and rescue employees, front line law enforcement officers and other essential critical infrastructure (ECI) employees.

The WCIRB estimates that the annual cost of COVID-19 claims on ECI workers under a conclusive presumption ranges from $2.2 billion to $33.6 billion with an approximate mid-range estimate of $11.2 billion, or 61 percent of the annual estimated cost of the total workers’ compensation system prior to the impact of the pandemic. The WCIRB noted that in developing this estimate it did not include a provision for non-ECI workers who may file a compensable workers’ compensation COVID-19 claim, nor did it adjust for the COVID-19 claims of ECI workers that may be compensable in the absence of a conclusive presumption.

————

This and other important workers’ compensation topics will be discussed tomorrow during part 2 of NAPEO’s Coronavirus Updates webinar where our very own, Paul Hughes, will share his thoughts.  Click here for registration details.

 

California Orders Payback of Insurance Premiums

In an unprecedented move, California Insurance Commissioner Ricardo Lara has ordered insurers that support “workers’ compensation, private passenger auto, commercial auto, commercial multi-peril, commercial liability, medical malpractice and any other insurance line where the risk of loss has fallen substantially as a result of the COVID-19 pandemic.”  It should be noted that no policies can be cancelled and at the same time all premiums are to be returned for March, April and potentially May.

Wow.

How the market will now correct itself in the largest insurance market in the US?  Will other states follow suit?

Detail from our friends at the Insurance Journal…

Tuesday, April 14, 2020

Insurance Commissioner Orders Companies to Pay Back Premiums Due to COVID-19 Fallout

California Insurance Commissioner Ricardo Lara on Monday ordered workers’ compensation carriers and insurers in at least five additional lines to pay back premiums because of the economic fallout of the COVID-19 pandemic.

Ricardo Lara

Commissioner Ricardo Lara

Premiums for March and April must be returned, with May premiums also on the table if the state’s stay-at-home order continues, according to Lara’s declaration.

Other insurance lines that must pay back premiums under Lara’s order include private passenger auto, commercial auto, commercial multi-peril, commercial liability, medical malpractice and “any other insurance line where the risk of loss has fallen substantially as a result of the COVID-19 pandemic.”

“With Californians driving fewer miles and many businesses closed due to the COVID-19 emergency, consumers need relief from premiums that no longer reflect their present-day risk of accident or loss,” Lara said in a statement. “Today’s mandatory action will put money back in people’s pockets when they need it most.”

The news also arrived on the eve of a Workers’ Compensation Insurance Rating Bureau meeting, where Classification and Rating Committee members are scheduled to vote on three proposed regulatory changes to send to Lara in response to the COVID-19 pandemic.

Dave Bellusci, executive vice president and chief actuary for WCIRB, wrote in an email that issues related to premium returns were “not within the WCIRB’s role, which focuses on advisory pure premium rates, experience modifications, payroll reporting. etc.”

Lara’s order requires insurers to provide premium credits, reductions, returns or “other appropriate premium adjustment” by August 2020. The department has requested a minimum grace period of 60 days for policyholders to pay premiums so that policies are not canceled for nonpayment, according to the news release.

The Department of Insurance did not respond to requests for comment on how the order would be carried out with regard to workers’ compensation premiums or whether employers and their insurers still were exposed by having employees work from home.

David A. Sampson, president and CEO of the American Property Casualty Insurance Association, said Monday that insurance companies were finding ways to help customers before Lara made his announcement.

Those arrangements include refunds and discounts for drivers who are traveling fewer miles, waiving late fees and pausing coverage cancellation, Sampson said.

“Over the last two weeks, insurers have announced billions of dollars in premium rate relief to their policyholders,” Sampson said in a statement. “Insurance is a data-driven industry. Rates are continuously adjusted based on losses and claims costs. If regulators allow insurers flexibility, private competitive markets will work to the benefit of consumers.”

The COVID-19 outbreak’s impact on driving patterns has already forced companies to respond and adjust, Sampson said. He added that some line policies, such as those found in workers’ compensation, are audited every year and allow for premiums to be adjusted.

“Now is not the time for arbitrary calls for rate decisions,” Sampson said. “We urge all stakeholders to support flexibility in the marketplace. California has the most complex regulatory structure in the nation. The department should be providing guidance to companies that are trying to implement premium reductions within the confines of Proposition 103.”

California voters passed Prop. 103 in 1988. It requires approval from the Department of Insurance before carriers implement rates for most property and casualty lines. The initiative does not apply to workers’ compensation.

Aside from actions already taken by auto insurance companies, other lines including workers’ compensation are likely to self-adjust in response to the COVID-19 crisis without government intervention, said Robert Hartwig, director of Risk and Uncertainty Management Center at the University of South Carolina’s Darla Moore School of Business.

“In terms of workers’ comp, premiums paid will be largely self-equilibrating irrespective of proclamations from insurance departments,” Hartwig wrote in an email. “Workers’ comp is an audited line, meaning insurers routinely examine policyholder (employer) payroll exposure to ensure that the premium paid matches up with the exposure and risk assumed by insurers. Given that payrolls for many/most employers in the U.S. will fall below expectations for renewals prior to March 1, insurers will wind up refunding some premiums and/or simply collect less in premium over the next several quarters.”

Each insurance line differs by risk, Hartwig said, and a broad-brush approach by an outside party might not be the best solution.

“One wild card is how fast all of this will bounce back,” he wrote. “Insurers will need to be judicious in any rebates/discounts offered, offering them periodically only as justified based actuarial determinations — not in response to proclamations by regulators and legislators.”

In addition to ordering the premium return, Lara also ordered carriers to file a report of all actions taken as well as contemplated future actions to refund premiums. The report must include monthly and overall totals for the percentage of refunds applied, aggregate premiums refunded, average percentage of refunds and the number of policyholders receiving a refund.

Take a ‘Deep Dive’ Into the Nonprofit Sector: Nonprofits Treading Water as Market Hardens

April 9, 2020 by Stephanie K. Jones & Amy O’Connor

The task of insuring nonprofit organizations is a complex one and agents, brokers, underwriters and carrier representatives say that in order to fully serve those entities that serve our communities in myriad ways, it’s vital to take the time to understand what they do and how they do it.

Specialists in this segment are more important than ever as the commercial market has tightened and property and liability coverage rates continue to rise, challenging the slim budgets of most nonprofits.

Headlines from the #MeToo movement and large jury awards for sexual abuse cases have also spooked carriers who write nonprofit business into offering smaller limits or pulling out of the space altogether, nonprofit insurance experts say.

As the third largest employment sector in the United States — behind retail and manufacturing — the nonprofit world, made up of 501(c)(3) tax exempt organizations largely focused on contributing to their communities, faces the types of operational challenges that exist in the for-profit universe but also issues that are unique to the charitable sector.

Funding is one such challenge, as nonprofits typically have smaller budgets than for-profit entities with funding coming from donations as well as from contracts with larger nonprofits or local, state and federal governments.

Finding the proper insurance coverage can be another challenge for nonprofit organizations in light of the different factors that affect the organization, such as its funding sources, liabilities that stem from its mission, its property, clients, staffing and a heavy reliance on volunteer participation.

The class requires specialists who take the time to really understand a nonprofit’s different challenges and exposures, experts say, particularly considering the changing market.

“We spend a lot of time on doing what somebody might call a deep dive into what they do,” said Polly Kosyla, president of S. Wolf and Associates, a Chicago-based independent agency focused solely on the nonprofit sector.

She said that includes developing an understanding of the nonprofit’s mission, their activities, the responsibilities of their volunteers and staff, their funding sources and the other entities with which they work.

“I think the front-end work of what we do is very labor-intensive to really get a full understanding of what an organization is not only doing now, but also trying to accomplish in the future,” added Charlie Kosyla, vice president at S. Wolf and Associates.

Because of the variety of nonprofit risks, there’s no one carrier that can provide the coverage needs for all of them, Charlie Kosyla added. In crafting solutions for their clients, it’s a matter of finding a fit with “the collection of carriers and MGAs we work with. It’s fitting all the policies because there’s no one carrier to cover them all. It’s a vast market.”

Peter Andrew, president and CEO of Council Services Plus in New York, an agency that only writes nonprofits, said there are few carriers that regularly and comprehensively work with nonprofit organizations because of their exposures, which can make it difficult for the smaller nonprofits to get all the coverage they need.

“There are certain coverage features that nonprofits like to have that maybe for-profit businesses don’t, like coverage for volunteers, coverage for special events, fundraisers, the ability to name additional insured, funding sources, municipalities, conference, location hosts, things of that nature,” he said. “There’s only a handful of insurance companies who are really writing a policy that’s comprehensive for the nonprofit world in that way.”

Hardening Market

In a space that is already limited in terms of carriers that specialize in it, nonprofit insurance experts say exiting capacity is a huge risk to the segment that could make nonprofits vulnerable to being underinsured or without the coverage they need to operate.

Andrew and other specialists say there are signs of a tightening market with higher rates and lower capacity for both liability and property insurance after many years of a very soft market.

“In addition to a shrinking capacity, some of the for-profits [carriers] are completely withdrawing from the nonprofit market or certain sectors of the nonprofit market, especially sectors that have high exposure to the molestation abuse — so nonprofits serving children, vulnerable adults,” said Brian Johnson, chief underwriting officer for the Nonprofit Insurance Alliance, a nonprofit-focused insurer writing business in 32 states and D.C.”

“Carriers are getting out of foster care, they’re getting out of camps, they’re pulling back limits on misconduct, on D&O; they’re even taking it out of the umbrella in some cases. They’re non-renewing or maybe extending [coverage] for a month,” said Peter Persuitti, managing director of the Nonprofit Practice at Arthur J. Gallagher.

Nicole Jolley, director of Nonprofit at Church Mutual Insurance Co. in Merrill, Wis., noted there has been “some tightening in the property space and we’re looking at liability as a potential next line of business that will be hardening.”

She added that the #MeToo movement and changes in sexual misconduct reviver statutes across the country, where many states are suspending the statutes of limitations for abuse and molestation, are having an impact on liability rates for both nonprofit and for-profit businesses.

Certain segments, particularly those that have exposure to minors or vulnerable adults, are seeing the biggest shift due to a swell in plaintiff attorneys going after nonprofits.

Mike Liguzinski, division president, Specialty Human Services at Great American Insurance Group in Cincinnati, Ohio, said the social inflation caused by a very proactive plaintiff bar, which is pursuing and winning more verdicts and high jury awards, is impacting rates. It’s not a new phenomenon, rather a trend that seems to cycle around about every 10 years, he said.

“We’re going to see rising rates for the next two to three years because of social inflation,” Liguzinski said.

Brad Baumgartner, executive vice president with IMA Inc. in Denver, said liability and property coverages in the nonprofit space are mirroring what is happening in the P&C market in general.

“Comp prices are coming down, which is great, because that has historically been a big spend for them. But just like anywhere else in health and human services, professional liability has been going up,” he said.

Nonprofit insurance broker Jordann Coleman with Heffernan Insurance Brokers in Walnut Creek, Calif., said a soft workers’ comp market has been a “silver lining” for many nonprofits as property and liability rates rise.

“Workers’ compensation has been the one area that we’ve been able to — at least rate-wise — provide some relief,” she said.

Carriers that specialize in nonprofits are taking note of the market changes.

Liguzinski wouldn’t go so far as to say that the market is in a crisis mode, but he acknowledged his company is “getting a ton of calls” from brokers trying to place business. “Let’s put it this way: Our phone is ringing. We don’t have to go looking for it,” he said.

Johnson of the Nonprofit Insurance Alliance tells a similar story.

“Our submission account for 2019 was up overall 25% year-over-year, and a lot of that is because some of the for-profits [carriers] are saying, ‘Yep, we’re out. We’re not doing it anymore.'” he said.

While the market is changing, Polly Kosyla says coverage is still available for most of her clients.

She said she has been in insurance long enough to remember a time when there were no carriers that would insure a shelter or provide a sexual abuse liability policy.

“There certainly are carriers that are willing to write a bulk of what our clients do,” she said.

Kosyla said her agency has succeeded in weathering the ups and downs in carrier capacity by working with a core group of carriers that “we can go to for more standard risks and … more unusual risks.”

For accounts that aren’t in the religious sector and haven’t been hit with lawsuits, Heffernan’s Coleman says coverage is still available, and she hasn’t seen much change from the specialized carriers that write the business.

“I think the ones that are in it have been in it for the long haul and will continue to stay in it for the long haul,” Coleman said.

Council Services Plus’ Andrew said he doesn’t think the nonprofit market is in crisis — yet.

“There’s only a handful of insurance companies who are really writing a policy that’s comprehensive for the nonprofit world, and when they start to go away or they start to firm up, then there’s even less options in the marketplace,” he said. “I don’t think it’s reached crisis level, but does it have to reach crisis level for us to get ahead of something?”

He said the landscape is shifting, and, “if we’re not careful, we’re going to have hundreds and hundreds, if not thousands of nonprofit organizations wasting resources to pay for more premiums or being outright canceled and not being able to get insurance. Then we really have a crisis.”

Impact of Funding

A nonprofit’s revenue sources are highly influential not only to how the organization is managed and its ability to complete its mission, but to the development of an insurance program for the risk, the experts say.

Many nonprofits receive funding from grants or contracts from municipalities, states or the federal government, and that funding dictates the level of limits or coverages that nonprofits must have.

Charlie Kosyla said brokers need to pay attention to those details, so that nonprofits have all the proper insurance in place and carriers feel comfortable writing the risk.

“The funding difference between a nonprofit and a for-profit is a for-profit might have a product that they’re selling or might have a revenue stream that’s coming in and supporting the business, whereas a nonprofit, they’re going to rely on multiple revenue streams,” Charlie Kosyla said.

“Nonprofit organizations are under obligation contractually to have certain insurances in place, and if that insurance isn’t available or it’s only available at a cost prohibitive price, then it threatens the nonprofit sector unlike it threatens any other sector,” Andrew said.

Andrew noted he has had clients with $8,000 budgets that have to spend $2,000 on insurance; dedicating such a big portion of their budget to insurance takes away their ability to help their local community.

“Every dollar that goes to insurance is one less dollar to its mission,” said Andrew. “We can’t do that to communities.”

Helping Nonprofits During Uncertain Times

Nonprofit experts agree this segment needs agents and underwriters who specialize in it and can help their clients understand their exposures and what coverages they need. That knowledge will be especially important to helping nonprofits navigate a firmer market with limited coverage availability.

“Insurance isn’t the top of their list of things that they’re doing on a daily basis,” Baumgartner of IMA said of the nonprofits with which he works.

Baumgartner said sometimes he sees exposures a previous broker hadn’t paid much attention to. Nonprofit brokers need to do a “thorough risk review, where you’re reading the terms and conditions of the various policies, discussing the limits, and benchmarking the pricing,” Baumgartner said. “I’ve run into a number of scenarios where there are a lot of coverage gaps.”

Polly Kosyla said many clients who have transitioned to her agency previously worked with agents that had been trained to work with commercial accounts but not necessarily with nonprofits.

“We get a lot of clients who are with insurance that doesn’t fit them or had premiums that are way too low or way too high because it doesn’t fit what they do. I can understand why a commercial agent would be frustrated trying to figure out how to insure a group that they really don’t understand,” she said.

An agent’s expertise and deep understanding of the client’s operation is not only essential to the client, it’s a big factor in how underwriters look at the risk, as well, said Penny Parisoff, non-profit product management director at GuideOne Insurance in West Des Moines, Iowa.

She said agents need to understand the types of clients the nonprofits serve and clearly articulate their story to the underwriter.

“I think that’s true on all of the nonprofits — because the nonprofit space has such variety to it — is that agent really learning the risks?” she said.

Agents and brokers can help their clients by working with them on their processes and procedures, their safety culture and preventative measures, and help them establish a risk management plan with steps in place, Great American’s Liguzinski said.

“Help them wear that hat or co-wear the hat with them, the risk manager hat,” he said. “A number of the carriers have risk management tools and portals and online training, and sending out a loss control person to work with them on their processes, procedures, background checks.”

Nonprofit Insurance Alliance’s Johnson says he tells his brokers one of the most important things to do is understand what contracts nonprofits are signing “because it’s the broker’s job to help the nonprofits figure out what coverages they need, what limits they need, and an important factor of that is what contracts are they signing, what liability we’re taking on.”

He also noted that brokers need to understand the differences in policy forms that different carriers offer and “not just go where you get the most commission, not just go where you know the person best.”

“Make sure you understand the policy so you’re going to get the nonprofit the best coverage available for the best price. Understand loss control services that the companies are offering,” he said. “Make sure you’re taking advantage of their employment risk management services.

Make sure you’re taking advantage of their driver training.”

He added brokers should be aware of different statute changes around the country and the changes in social inflation and he cautioned against brokers going with a policy that offers the highest limits because it may not be to the benefit of smaller nonprofits.

“It’s easy for a broker to say to a nonprofit, ‘You need a $10 million umbrella. Get as much coverage as you can get as possible,’ because they can never be accused of not offering to give them enough coverage — they’re protected,” he said. “Nowadays, what that does is it puts a target on their back, so the lawyers will say, ‘They got $10 million of coverage. I think I’m going to demand $10 million.’ It never fails.”

Andrew says he wishes more brokers would become specialists in the nonprofit sector and learn about it on a “grassroots level.”

That intimate knowledge would help underwriters feel more comfortable offering coverage in the segment.

“If more brokers got into the sector and took time to understand the sector, then yes, more companies would understand what nonprofits are and then understand that these organizations are not the risk that they might be perceived. No one’s taken the time to really talk through what this organization does with an underwriter,” he said.

Nonprofits are evolving and working to address and manage their exposures, said Persuitti. “It’s a very dynamic sector that is in many ways at the edge of lots of risk, but very committed to screening its volunteers. It’s learned so much. It’s taken that knowledge and science and the advancements of technology.”

Persuitti said despites its challenges, the nonprofit segment is a “remarkably growing space” that is very rewarding to work in.

Andrew said he hopes the insurance market will work to ensure the availability and affordability of insurance for nonprofits before it becomes a crisis because that would be devastating for not just the nonprofits themselves, but the communities they help.

“That worries me because I see what these small community-based organizations are doing on the local level,” he said.

Insureds and insurers benefit from fair premiums being charged for the risk — not too high or too low, he said. The broker’s job is to “bring those two ends together” so both sides get a fair deal.

“When those two things come together, the nonprofit’s expectations and the company’s understanding, boy, that’s a great thing,” Andrew said. “We don’t have enough of that right now.”

 

Want to know more about how COVID-19 could affect your company? Give Sharlie Reynolds a call at 305-495-5173 or email her at sreynolds@libertateins.com.