The Insurance Risks Facing Nonprofits Today
News Pamela Davis, founder, president and CEO of the Nonprofits Insurance Alliance, answers questions about how nonprofits can better manage risk.
What are the biggest risks facing nonprofits today?
Nonprofits are being asked to take on a tremendous number of responsibilities once shouldered by government. They are increasingly being asked to provide care for the most vulnerable, including dependent and fragile children and adults. They do this while government funding for these programs is declining and needs are increasing. Nonprofits also do not enjoy the protections from litigation benefiting government agencies, and government agencies increasingly shift liability, including their own, to the nonprofits. Despite heroic efforts made by nonprofit leaders and staff, these pressures make it extremely difficult for them to provide the level of care essential to prevent harm to these vulnerable populations.
How have you seen risk management priorities change for nonprofits throughout your career?
In general, nonprofits have always been eager to do whatever they can to operate safely, in spite of funding that does not provide sufficiently for training and facilities. What has changed is the growing pressure on nonprofits to take over the care of even more complex and difficult populations from the government, while having access to fewer and fewer resources.
What liability or risk is most commonly overlooked by nonprofits?
The most commonly overlooked risk is probably that of employment risk. Because Nonprofits Insurance Alliance knows this is a significant risk, we offer free employment risk consultations to any of our member-insureds on an unlimited basis. Unfortunately, many nonprofits don’t recognize when they need to call for help and have already committed an infraction before they know it. In most states, employment law is clear about the obligations of an employer, and juries are quick to send a message with large financial awards if an employer does not follow the letter of the law.
What was your goal in creating the Nonprofits Insurance Alliance, and in what ways do you think the alliance impacted the nonprofit insurance industry?
My goal in creating Nonprofits Insurance Alliance was to give nonprofits control over an important financial service — insurance. Insurance is a bit like electricity — you don’t notice it until you don’t have it. The commercial insurance industry is inconsistent in the type of nonprofit risks it is willing to insure. Without property/casualty insurance, nonprofits can’t operate.
Now with 18,000 member-insureds and $500 million in assets, we know the risks facing nonprofits, how to value and fairly price those risks and how to help them with free risk management services. Because we exist, commercial insurance companies have had to up their game or lose their business to us. And once nonprofits come to us, they typically don’t go back to the insecurity of the commercial insurance market.