Christian Leadership Alliance
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Managing Risk in Risky Times
Tips to improve your insurance program in an economic downturn| Outcomes, Winter 2009
Every general counsel, chief financial officer, and risk manager cares about the cost and quality of their ministry's insurance. While health and other employee insurance costs are often the second or third largest expenditure for ministries, business coverage like workers' compensation, property, general liability, directors' and officers', abuse and molestation, auto liability and property damage, Internet, and foreign liability insurance can be equally burdensome and confusing to manage. Whatever was difficult for ministries to pay for and understand five years ago is all the more difficult today.
Here are some insights and tips to help reduce your overall cost of risk while improving the quality of your business insurance program.
Focus on more than premiums
Premiums are usually the largest insurance-related cost. But there are several other things to consider when thinking about your overall cost of risk:
• Claims: Even ministries that are fully insured often forget the hard costs involved when a claim occurs. Deductibles, amounts exceeding the policy limit, future premium, and deductible increases due to the claim are among a few high costs that should be accounted for as well.
• Administrative time: It is important to partner with an insurance broker who not only can help you identify exposure and determine proper coverages, but can also be an effective outsourced part of your risk management program, assisting with contract review, loss control, and processing claims when they occur. All of these functions save you valuable staff resources.
• Fully insured vs. self-insured: While fully insured programs transfer most or all of the risk of loss to the insurance company, they can also be very expensive given the nature of the risk, the loss control program in place, and the organization's loss experience. Self-insuring or partial self-insuring is a valid way to recapture excess premium while having proper resources to pay for claims when they occur. Such risk retention can take various forms, such as high deductibles, quota share, lowering limits, risk retention groups, and captives.
• Being under- or over-insured: Not having enough coverage can result in losses that are greater than the insurance policy limit, which may result in money coming directly out of your ministry funds. On the other hand, over-insuring is a waste of money. Find the right balance that makes sense for your particular needs.
• Umbrella coverage: Umbrella policies should be strategically coordinated with their underlying coverages. Otherwise, an absence of coverage or gaps in coverage may result in affecting premium cost as well as the cost of claims when losses occur.
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