All company managers, not-for-profit and for-profit, know they need insurance. They don’t always know why, and they don’t always understand exactly how it works, but they know there are funders, landlords, banks, and others who require that they have it.
For some, that is the main reason they carry insurance. Most others, however, invest in insurance coverage because they feel they owe it to their clients, employees, directors, funders, and neighbors – and to themselves – to make sure a fire or some other calamity does not put them out of business. This is a moral obligation that most people recognize and believe in.
There are a lot of other good reasons to carry insurance, though. Too often we hear stories about lawsuits filed by a plaintiff nobody has heard of, and worse, that the alleged incident occurred more than two years ago. It is a relief to know that you can send the papers to your insurance broker and not have to worry about finding and paying for a lawyer.
Risk Management Developments
Allow Easier Access to Insurance
But there is more to risk and insurance that many do not recognize. Development of risk management techniques in the financial markets, engineering and design, and public health has allowed the world economy to grow and make advancements that could not have been dreamed of 100 years ago.
For example, more effective seat belts and air bags have reduced the number of serious injuries resulting from car accidents and have thereby transformed the way we view automobile transportation and its aggregate public health cost.
The expansion of insurance markets using ever-more creative risk financing techniques has at the same time reduced the cost of insurance and increased its availability. This allows us to engage in activities that might otherwise be too risky to undertake.
Today there are very few not-for-profit programs that cannot be insured at a reasonable cost. From medical professional liability for clinics to outdoor adventure programs, prison release, methadone treatment, and child care, there are a variety of insurance and risk management techniques available.
So, for a modest insurance premium, no director or officer need worry about losing the corporation’s assets – or their personal assets – because of litigation arising from these sorts of programs. It is not just about protecting them for what they are doing now, but it also allows them to think about and develop more creative programs to meet their clients’, and/or their funders’, needs.
This is why, as an essential part of the planning function, it is important for a not-for-profit organization to have a close relationship with an insurance broker/risk advisor.
As the not-for-profit sector grows, programs are being funded and carried out in new and different ways. They include shared contracts (between agencies), subcontracts, joint ventures, partnerships, and spin-offs (from religious institutions and other not-for-profits, or even from for-profits).
There are also increasingly more ways that not-for-profits are teaming up with the government to deliver services to the public. Many of these programs, either because of their inherent nature or because of the way services are delivered, require a careful analysis of risk and legal liability issues to determine the best way to protect all parties. It is not uncommon for liability issues to stall program development or stop programs already in operation.
The Legal Landscape
As our economy has evolved, so has the legal environment. The increase in federal, state, and local statutes has created many new areas of potential liability for which insurance protection is needed.
For instance, civil rights laws over the past 30 years have changed the way we manage employees, and the number of employment-related liability claims has increased dramatically. As new cases are brought and new laws are written, the landscape continues to evolve. The insurance to protect against these claims must adjust to meet the growing need.
One of the most publicized evolving areas of potential liability, and perhaps the largest, involves the Internet. It affords huge potential for claims related to data theft and destruction, identity theft, release of protected personal information, intellectual property theft, and unauthorized use of trademarked and copyrighted material. And, as more business is conducted online, the risk of lost revenue and damage to property increases tremendously. Most not-for-profits, like all of us, rely heavily on the Internet to conduct business, and they need to manage those risks appropriately.
Insurance and risk management are integral parts of the management of any organization. They provide a degree of certainty in an uncertain world that allows groups to take the risks they need to grow and fulfill their missions.