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Helping the helpers Agency helps nonprofits, social service providers, fulfill their missions By Dave Willis Many agencies do well by doing good. They find value—personally or corporately—in doing good things for their community. But one agency in Washington, D.C., has found a way to do well by helping those who do good. Since its founding in 1949, the agency—now called The CIMA Companies, Inc.—has provided insurance to nonprofit and other human services organizations. In so doing, it has built a strong business—and a solid reputation—in the market. It’s a sizable market, too. More than 850,000 public charities and 100,000 private foundations are registered with the IRS, as are nearly 465,000 other types of nonprofits, such as chambers of commerce, fraternal organizations and civic leagues. Seven of the agency’s property and casualty account execs and two benefits professionals work with nearly 400 nonprofit clients of all sizes—mostly, but not entirely, located in D.C., Virginia and Maryland. Premiums range from a few hundred dollars to several hundred thousand dollars. Some of the agency’s larger nonprofit clients tap the agency’s CIMA Risk Control Services subsidiary for fee-based loss control services. Just like for-profits In many ways, nonprofits aren’t all that different from for-profit enterprises. According to Bill Henry, CIMA director of communication, nonprofits face risks covered by commercial general liability, property—including electronic data processing equipment—workers comp and auto. “Even if they don’t own vehicles, nonprofits still need non-owned and hired coverage,” he says. Nonprofits that offer counseling and other such specialized services face professional liability exposures, Henry adds. And like any organization where people work together, they have employment practices liability exposures, such as harassment and discrimination. They must comply with various government regulations, just like for-profits, he notes, and they need protection against losses arising from employee—as well as volunteer—dishonesty. “Plus, their directors and officers need to be insured against allegations of wrongful acts,” Henry says. “And if they offer employee benefit plans, they have exposures in the administrative practices and fiduciary decision making associated with those programs, just like for-profit organizations.” Although directors and officers exposures are similar to those of for-profits, particularly with employment practices, underwriters view them as less severe for nonprofits, Henry notes. As a result, D&O liability insurance is often less expensive. “Still, we emphasize the risks, so clients recognize the exposure and do what they can to minimize it,” he says. “And we encourage our nonprofits to adopt board governance standards—preventing conflict of interest, adhering to strict audit standards, due diligence on potential transactions and so on—similar to their for-profit counterparts.” A different set of risks On the other hand, Henry explains, nonprofits deal with risks not so often faced by for-profits. “For instance, many social service agencies work with children, the elderly and people with disabilities,” Henry notes. “Sometimes mental illness or substance abuse problems are involved, and some operations involve dispensing medications.” Some nonprofits also operate group homes. Such activities can open the door to a range of special exposures. “They risk injury to a client being transported by vehicle, attacks on staff by disturbed clients, sexual molestation of adults or children, or unauthorized use of medications,” Henry explains. Nonprofits also have an exposure that no for-profit has: the risk of losing their tax-exempt status, he adds. “In recent months, the IRS and Congress have shown increasing interest in violation of IRS regulations by nonprofits, in such areas as political activity during elections, and the use of donated property,” Henry notes. “Nonprofits should know where the boundaries are that preserve their tax-exempt status.” Another key difference is the nonprofits’ use of volunteers. United States Bureau of Labor Statistics data show that more than 61 million people volunteered through or for an organization at least once between September 2005 and September 2006. “Because they are not paid, volunteers aren’t always held to the same standards of performance and accountability as employees are,” Henry notes. “This is a mistake, because volunteer activity has a variety of risk exposures—injury to the volunteer, injury to someone else, damage to someone’s property, dishonest acts such as theft of funds, and so on.” Focused response As part of its service, CIMA makes sure that coverages fit the distinct needs of the particular social services or nonprofit operation. Plus, the agency helps clients use risk management techniques used by its for-profit clients. “To address risks properly, nonprofits need to examine their exposures, rank them in terms of likely severity and frequency, and address them just as for-profit organizations would,” Henry says. For some clients, the agency provides in-house loss control services. For others, it taps carrier services, and makes sure they’re delivered. In some instances, it’s a combination of the two. “Insurance company underwriters want to see this work has been done by the prospect or client, just as they’d want to see it for any other organization,” Henry observes. “One of the most in-demand services that we provide deals with safety procedures involving the care and transportation of vulnerable clients,” Henry explains. Also, the agency has developed customized claims tracking programs to help some of its larger nonprofit clients identify trends, so procedures can be modified to address specific problems. Volunteer risks The agency’s response to volunteer-based exposures has grown into a business all its own. CIMA established a separate unit, Volunteers Insurance Service (VIS®), which offers accident medical liability, volunteer liability and excess auto liability insurance for volunteers. VIS got its start in the 1960s when a federally funded program—one that included Foster Grandparents, the Retired & Senior Volunteer Program (RSVP) and the Senior Companion program—couldn’t find insurance that covered volunteer activities. “Our chairman at the time, Jay Jagoe, was quite active in the nonprofit community,” explains Laurie Coleman, CIMA senior vice president. “He learned of the need and created a program that included accident and liability coverages. “After our initial success, we recognized there were other nonprofits, including non-federally funded ones such as Meals on Wheels, Goodwill Industries and volunteer action centers that used volunteers and were at risk also,” Coleman explains. “So we expanded the program and offered two separate programs—one for federally funded organizations and one for others.” Today, VIS covers volunteers who work with some 5,000 organizations. The program features three coverages: accident medical insurance underwritten by Life Insurance Company of North America, a CIGNA subsidiary; and personal liability and excess auto, written by Wausau Insurance Company. “Both companies are A rated, admitted markets,” Coleman notes. The program is marketed directly to nonprofits by CIMA. It’s also now available for other agents to offer their own clients. The accident medical coverage has a limit of $25,000 and costs $3.75 per volunteer per year. The volunteer liability limit is $1 million, costing $1.72 per volunteer annually. The excess automobile liability limit is $500,000 for $6.04 per volunteer per year. Coverages are available individually or in any combination. One reason the program is attractive to nonprofits and their agents is that it lets nonprofits segregate risks that volunteers represent, Henry explains. “Plus, they don’t have to share limits of liability or have their claims experience affected.” The program has attracted social service nonprofits of every description. “In addition to traditional volunteer programs and federally funded programs, we also offer a court-referred alternative-sentencing volunteer program and a work release program for inmates out working on road crews,” Coleman explains. Coverage for the court-referred and work release programs is restricted—only accident medical insurance is included, and prices are higher. VIS offers clients nonprofit risk management expertise via its Web site and through a newsletter published three times a year. “The newsletter addresses issues for directors, statistics on losses and other information,” Coleman says. Recent topics included volunteer drivers and risks faced by organizations whose volunteers work with children. Going to market The agency has forged partnerships with various groups to make the programs more visible to nonprofits that engage volunteers. “For example, we’ve worked for 17 years with the Center for Non-Profit Corporations in New Jersey to market volunteer insurance and D&O with their endorsement,” Henry says. “We established a relationship two years ago with the Texas State Office of Risk Management to enroll the volunteers of state agencies in our program. We also have relationships with state agencies in Kentucky and Virginia that promote volunteerism.” In addition to CIMA staff, more than five dozen agencies and brokers market the program. “It’s available for use by other agents, brokers and program administrators through our Web site,” Henry says. “Any licensed agent who has nonprofit customers with volunteers can access it at www.cimaworld.com/agent.” There’s a simple click-through producer agreement and online application that can be completed in just a few minutes, he adds. The premium is computed automatically based on the number of volunteers, and participating agents get 12% of the premium on new business and renewal business. Agents marketing the program may encounter some pretty tough competition—from existing clients. “Nonprofits talk to nonprofits,” Coleman says. “Word of mouth is still our best advertising.” Still, the market is there. Of the more than 60 million volunteers in the United States, 2.5 million are covered through VIS. That leaves plenty of opportunity for other agents and brokers to do well also—by helping those who do good. * Dave Willis is a New Hampshire-based freelance writer and regular Rough Notes contributor. For more information: |
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