Authors: Stacie Kroll
It is that time of year again where the majority of higher education risk managers begin preparing their insurance budgets for the next fiscal year, and let's be honest, it's not looking pretty. By nature of our discipline, we are privy to an onslaught of information regarding market rates, loss trends, insurer appetites (or lack thereof) for higher education risk, and emerging risks in the industry. We know that the state of the market is somewhat out of our hands and rate increases are inevitable; however, our budget managers and Chief Financial Officers may not.
When preparing your budget and having those difficult conversations with the budget approver, it is critical that risk managers view this as an opportunity to educate their audience on insurance market conditions. This is a great time to exercise your story telling skills and explain the reasoning behind the increases in a way that resonates with your audience.
Start your story by considering the perspective of the insurer and why they are taking the position they are and be able to explain the situation to someone who is not involved in day-to-day risk management and insurance.
- Is there a trend of significant nuclear verdicts in the industry, such as with Sexual Assault and Molestation? Share some headlines and results.
- Is there a likelihood of liability claims resulting from COVID-19 related losses in the industry? Share the status of COVID-19 Legislation in your particular state. Share existing litigation pertaining to the education sector. Explain how these can affect the insurer's loss ratio and thus their pricing.
- Is your institution's loss experience driving higher than average rate increases? Share that data and have a strategy for how you plan to challenge the increases by sharing your lessons learned and resulting risk mitigation efforts with insurers.
- Be prepared with strategies for how the institution can explore mitigating the increases or retraction of coverage through alternative risk financing, increases in retention, or even going to market. If these strategies are not feasible, share why they don't make sense financially, and explain that you have considered the options.
- If you need to purchase additional layers or additional products to offset market retractions and address pending coverage gaps, be prepared to explain the impact of coverage gaps in practical claim examples and why this is the new "cost of doing business."
- Review your budget proposal with your broker not only for accuracy, but they can also serve as a sounding board for rationale.
Risk managers should not just assume that budget approvers will understand the increases and accept them blindly, particularly as higher education is being stressed by COVID-19 related financial pressures in several aspects.
By arriving to budget meetings prepared and ready to educate, you are showing the value of having dedicated risk management expertise, and ultimately making it easier for the approvers to get to "Yes".
For more insights from Gallagher's Higher Education team, check out our resources library.