How to Succeed in BusinessWithout Really Trying10 Practical Tips to Sharpen Valuei Y N fi ’ I P f liin Your Nonprofit’s Insurance PortfolioScott R. Konrad, Senior Vice President & Not‐for‐Profit Business Practice LeaderHUB International Northeast Limited | +1 (212) 338 2295 Direct
Today’s Discussion Themes• A practitioner’s perspective on your sector• 10 practical tips• Market watch• Open forum – Q&A
Nonprofits I’ve Known & LovedAlfred P. Sloan FoundationAmerican Civil Liberties UnionAmerican Jewish World Service Barnard College
International Rescue CommitteeInternational Society for the Performing Arts Minds Matter NationalNational Audubon Society
Boys & Girls Clubs of America Brandywine River MuseumConcern Worldwide (US)Council on Foreign RelationsCounterpart International
National Endowment for DemocracyNational Kidney FoundationNeighborWorks America New York Botanical Garden OceanaCounterpart International
Delaware Art Museum Elizabeth Glaser Pediatric AIDS Foundation EngenderHealth Episcopal Relief & Development
Oceana Phoenix House Foundation Population Council Protestant Episcopal Church in the USASave the Children USA
Family Care International Food & Water WatchGoodwill Industries of Greater NY & Northern NJHuman Rights First Human Rights Watch
SeriousFun Children’s Network The Cathedral Church of St. John the Divine The Ocean FoundationUnited Way of New York City Winterthur Museum & GardensHuman Rights Watch
International Center for Transitional Justice Winterthur Museum & Gardens World Relief
My Window Into Your Sector• Surprisingly diverse risks• Resource‐challenged• Strategic challenges trump
proactive risk management• Diffuse accountability forDiffuse accountability for
risk and insurance• Need for expert external
counsel and advocacy• Loyal buyers
Why Worry About Risk?• “NY Charity Accused of Bilking Teens on Summer‐Job Pay” (08/14/15)• “California to Investigate Group Behind Planned Parenthood Videos” (07/27/15)• “Pakistan Expels Aid Agency Save the Children” (06/11/15)
( / / )• “Law Enforcement Agencies Nab Deceptive Cancer Groups” (05/19/15)• “Perp Walk: Nonprofit ED Gets Jail Time” (05/18/15)• “Nepal Earthquake: Americans Stuck as Death Toll Rises” (04/27/15)• “Wounded Warrior Project Sues Small Nonprofit Over Similar Logo” (04/30/15)• “Suit Claims AIDS Charity Bilked $20 Million in Federal Funds” (04/09/15)• “$19 Million Loss Slams Doors on NY Agency” (02/03/15)• “Boy Scouts Ordered to Pay $7 Million” (12/17/14)• “Abuse Suits Have Twin Cities Archdiocese Mulling Bankruptcy” (11/21/14)g p y ( / / )• “Ebola Tests Insurers’ Medical Evacuation Services as Airlines Cut Flights” (10/13/14)• “Suit Alleges $2 Million Embezzlement by Ex‐PBS Official” (09/26/14)• “Livestrong Gifts Fell by a Third After Armstrong Admission” (09/12/14)• “Lawsuit: NY Charity Threw Parties While Missing Paychecks” (08/05/14)Lawsuit: NY Charity Threw Parties While Missing Paychecks (08/05/14)• And more...
#1: Consider the Big PictureInsurance premiums
₊ Deductibles and self‐insured retentionsretentions
₊ Non‐covered claims₊ Payments exceeding available insuranceinsurance
₊ Adverse claims experience₊ Workplace inefficiencies₊ Declining morale₊ Loss of reputation₊ Loss of funder confidence
TOTAL COST OF RISKTOTAL COST OF RISK
#2: Strategy First – Insurance Last
Assess & Identify
Avoid & Reduce Transfer
Ri kRetainRi k
• What risks do • Due diligence in • Consider all key • Look at your loss
IdentifyRisks
ReduceRisks Risks Risks
• What risks do you face?• How frequent?• How severe?• Worst‐case
• Due diligence in new ventures• Property protection• Safety programs
• Consider all key contracts• Which way does risk flow?• Does the ‘other
• Look at your loss history• Avoid ‘trading dollars’ for low deductibles
impact? • Travel risk management• HR policies• Other preventive
guy’ have the Right Stuff?• Do you?
• Absorb risk that’s predictable and affordable
preventive measures
#3: Look Off the Beaten PathTraditional& Obvious
• Workers’ Compensation
Emerging &Dangerous
• Sexual Misconduct• Workers’ Compensation• Auto• General Liability• Property
• Sexual Misconduct• Professional Liability• Information Risk• Media Liability• Property
• Management Liability• Crime
• Media Liability• International
• Nontraditional risks are rarely covered by traditional insurance• Exposure heightened by judicial and regulatory environments• Look at your business holistically – think outside the boxy y
#4: Sweat the Details• No 2 insurance policies are
created alike• The fine print will help or hang
you at time of need• Know what you’re buyingKnow what you re buying• Don’t overlook insurer solvency– And sector experience and
i d i i fl ibilicommitment, underwriting flexibility, value‐additive services
• Lean on your broker
#4: Sweat the Details – Common Traps• Coinsurance• Narrower excess terms than
i
• Definition of “Insured”• Water damage
l i /li i iprimary• Liability coverage for
individuals in non‐owned
exclusion/limitation• Professional Services
exclusion(s)individuals in non owned autos
• Securing insurer’s consent
exclusion(s)• Multimedia content• “Insured contracts”
to engage D&O counsel• Inadequate Crime
protectionprotection
#5: Avoid “Bidding” Insurance
• Pits multiple brokers against each other to quote
• Empowers a single broker to represent your interests
Marketing Competition Broker Selection
q• Risks fragmenting the marketplace• Transactional focus emphasizes going‐in price instead of best qualification to manage long term
p y• Focuses on reducing long‐term cost of risk
• Places greater weight on broker’s resources and capabilities as a riskqualification to manage long‐term
cost of risk• May result in “right horse/wrong jockey”
resources and capabilities as a risk management partner
• Promotes consistent message in marketplace
• Must be carefully managed• Demands thorough post‐marketing analysis
• Maximizes negotiating leverage of controlling broker
• Broker shoulders most of the work – clean analysis
#6: Start Early• Quality can’t be rushed• Begin planning 120 days out
Exposure update program structure- Exposure update, program structure, potential markets, placement objectives
• Communicate continuouslyCommunicate continuouslywith broker
• Allow time for insurer analysis- Loss trending & developmentLoss trending & development, physical surveys
• Minimize opportunity for timing‐related excusestiming related excuses
#7: Showcase Your Strengths• Top‐level engagement• Internal risk management
infrastructure• Corporate safety initiatives• Lessons learned from claims• Lessons learned from claims• Regard for long‐term
relationships
#8: Meet Your Underwriter• You tell your own story best• Be more than an abstract name• It’s a relationship business• Strategic partnerships will help
you through market cyclesyou through market cycles
#9: Treat Your Broker as a Partner• More than a transactional
intermediary• A trusted counselor and advocate• Strategic role• Extension of your team• Extension of your team• Give a seat at the table
- New ventures- Contracts- Operational changes- Shift in strategic directiong
#10: Know ‘The Deal’• Two basic methods of brokerage
remuneration- Commissions paid by insurers (% of premium)
- Negotiated fee for service
• You can’t assess the value of a service without knowing what it costscosts
• Insist on complete operational and financial transparency
Bonus: A Look at Today’s Market• Our market is inherently cyclical• Recent years have been favorable
for insurers• It’s a good time for buyers
Third consecutive year of rate– Third consecutive year of rate softening
– Plentiful capacityH l h i i– Healthy competition
– Underwriting discipline
Insurer Combined Ratios: 1990‐20158.
8 122.
3125
o
109.
4
110.
2
118
109.
5 112.
5
110.
2
07.6 10
9.7
110.
2
4 07.911
1.1
112.
3110
115
120
Com
bine
d R
atio
10
104.
1
102.
5 105.
4
104.
2
98.9
102.
4
10
103.
4
98.3 99
.9
98.910
2.0
100
105
mm
erci
al L
ines
C
91.1 93
.6
90
95
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13F
14F
15F
Com
m
2007‐2012 figures exclude mortgage and financial guaranty segments.Sources: A.M. Best (1990‐2014F); Conning (2015F) Insurance Information Institute.
Commercial Renewal Rate ChangesPeak = 2001:Q4
+28.5%
Pricing turned negative in early 2004 and remained that way for 7.5 years
Pricing turned positive in Q3:2011, the first increase in nearly 8 years
Trough = 2007:Q3 ‐13.6% Rate trends
roughly flat
Renewal Pricing TrendsEarly 2009 through Early 2015
Few accounts are seeing increases
Source: Barclays Commercial Insurance Buyers’ Survey, 2015
#11: Use the Market to Your Advantage• Ride the wave of rate reductions• Canvass purposefully and
i llstrategically- Rifle‐shot approach
• Consider alternatives if...- It’s been 3‐5 years since last outing- Your business has changed significantly- Your insurer’s appetite or pricingYour insurer s appetite or pricing has changed significantly
- Policyholder service has deteriorated• Avoid going to the well too oftenAvoid going to the well too often
Open Forum – Q&A
For More InformationScott R. KonradSenior Vice PresidentNot‐for‐Profit Business Practice LeaderHUB International Northeast LimitedHUB International Northeast Limited5 Bryant Park | 1065 Avenue of the AmericasNew York, NY 10018(212) 338 2295 Direct(347) 491 9671 Mobile(347) 491 9671 [email protected]
Scott Konrad is an officer of HUB International Northeast, with responsibility to build, brand, grow and lead a specialty practice serving the insurance, risk management, and employee benefit needs of tax‐exempt organizations. An industry veteran with 38 years of experience, Scott began his insurance career as a claims adjuster with Liberty Mutual Insurance Company. He transitioned several years later to the brokerage sector, serving in ainsurance career as a claims adjuster with Liberty Mutual Insurance Company. He transitioned several years later to the brokerage sector, serving in a variety of claim management, sales leadership, and relationship management roles with global brokers Johnson & Higgins, Marsh & McLennan, and Willis, over the majority of his career. From 1996 to 2003, Scott was an officer of the Church Insurance Companies, the denominational insurance arm of the Episcopal Church, for which he established a regional service center and managed deployment of the companies' products and services to over 2,000 institutional clients in 20 Episcopal dioceses throughout 11 Northeastern states. Scott joined HUB in 2013 from Crystal & Company, an independent, privately‐owned insurance broker. A graduate of Colgate University, Scott has been recognized by Risk & Insurance magazine as a Power Broker® to the Nonprofit sector for the past five consecutive years, and he is a frequent speaker and author on nonprofit risk management themes. He launched and fronts HUB’s corporate partnerships with InsideNGO and the Nonprofit Risk Management Center. Scott is accredited in Risk Management for Churches and Schools by the University of Cambridge (UK), and serves on the diocesan insurance board for the Episcopal Diocese of Connecticut.
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