Insuring nonprofits
Hard market inspires entrepreneur to form carrier for nonprofits
By Phil Zinkewicz
She is a woman of vision. In fact, she is living her vision. Against all odds, she started up an insurance company, based on her master’s thesis, during one of the most difficult markets the industry has ever seen. Today, Nonprofits Insurance Alliance Group is a major and well-respected player in the nonprofit, social services sector.
That testimonial comes from Robert L. Miller, senior vice president of Brown & Brown Insurance Services in Allentown, Pennsylvania. He is talking about Pamela Davis, founder and chief executive officer of Nonprofits Insurance Alliance Group, which consists of four companies: Nonprofits Insurance Alliance of California (NIAC); Alliance of Nonprofits for Insurance, Risk Retention Group (ANI-RRG); National Alliance for Nonprofits for Insurance (NANI), a captive reinsurer; and Alliance Member Services (AMS), the management company that supports the other three.
NIAC provides liability insurance to nearly 6,000 nonprofits in California and writes in excess of $40 million in premium. ANI-RRG provides the same coverages to nonprofits in 23 states plus Washington, D.C., and writes more than $15 million in premium.
The difficult market to which Miller refers was, of course, the mid-1980s when insurers, after years of cash flow underwriting, began to retrench in the face of impending losses. Almost the entire insurance industry was digging in its heels, and coverages for many lines became either unaffordable or unavailable.
During this time, Davis, having returned to school at the age of 30, was working toward her master’s degree at the University of California at Berkeley, majoring in public policy. “There was tremendous insurance instability in the nonprofit, social services sector, and it seemed to me that insurers were dictating what social services organizations could operate in California,” Davis says. “The state had just passed a law allowing nonprofits to create a risk pool and I recognized that, if there was going to be any stability in the market, nonprofits would have to do just that. I wrote my thesis on that subject, and then the California Community Foundation gave me a platform when they published 5,000 copies. That’s when I began looking for the backing to actually start up a company.”
After she had received several small grants from various foundations, Davis’s first major capital commitment came from the Ford Foundation in the form of a $500,000 loan. Other foundations came on board, and after a two-year effort Davis had $1.3 million in low-interest subordinated loans to work with. She realizes now that this was a thinly capitalized start and was more cautious when it came time to start the second company in the Group. However, she is proud to say that all loans were repaid with interest.
In 1989, NIAC was up and running. “It took two years of development,” Davis says. “We had a rocky start at the beginning. There was an earthquake in Santa Cruz, and for a while we were without electricity and telephone service. But we hobbled along. Small local brokers across California cared deeply about the nonprofits market and took a chance with us. Many of those original brokers remain with us today.”
Of the 5,500 charitable nonprofit organizations that are members of NIAC, 29% are in community service, 26% in arts and education, 12% are in mental health and health-related developmental disabilities, 11% represent shelters, 8% are in neighborhood improvement and social action, another 8% are in animal care and the environment, and 4% in philanthropy and volunteering. The company writes broad form general liability, social service professional liability, commercial auto liability and physical damage, non-owned and hired auto liability, improper sexual conduct, directors and officers liability, and umbrella. Property is provided through their MGA operation.
Expansion plan
Ten years after the establishment of NIAC, Davis wanted to expand the company’s operations, but by law it could operate only in California. In 1999, she started up Alliance of Nonprofits for Insurance, Risk Retention Group (ANI-RRG) with $10 million in grants from the David and Lucile Packard Foundation and the Bill & Melinda Gates Foundation. Like NIAC, ANI-RRG is a 501(c)(3) nonprofit, serving more than 2,000 other nonprofits in 23 states and the District of Columbia. The states are Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Iowa, Kansas, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, North Carolina, Ohio, Oregon, Pennsylvania, Utah, Vermont, Virginia, and Washington.
“A key strength of our organiza-tions is our singular commitment to the nonprofit sector and our membership in it,” Davis says. “We broadly serve the nonprofit sector, including nonprofits and brokers of all sizes, by providing appropriate insurance at prices that are adequate and fair, and that can be maintained over the long term. Our prices reflect our best assessment of the lowest sustainable price for the individual risk involved, but not necessarily the lowest price during a soft market. We believe that providing the nonprofit sector with a reliable, long-term solution takes precedence over short-term market pressures.”
It’s not only insurance products that Davis’s group offers to members and brokers. Susan Bradshaw, vice president of marketing and member/broker services, explains how Davis’s organization addresses the risk management elements of nonprofits.
“The nonprofits that are our members have certain exposures that need to be dealt with to mitigate losses,” says Bradshaw. “We believe that risk management is the cornerstone of accountability in any organization. To support that belief and to help our member insureds avoid claims, we offer a wide range of educational and loss prevention resources either highly subsidized or free of charge.”
Among those resources, Bradshaw says, are:
• Members-only secure Web site. Nonprofit member-insureds have access to risk management tools, including checklists and common form templates.
• D&O pre-termination consultation. If D&O is bound, nonprofits are eligible for free unlimited consultation with one of the Group’s labor and employment risk managers.
• Personnel handbook review. If D&O is bound, nonprofits can have their personnel handbook reviewed free of charge to ensure that it is up to date.
• Driver training. If auto coverage is bound, nonprofits are eligible for free driver training either on site, online, or via self study.
• Vehicle monitoring program. A toll-free “how am I driving” tool assists members in managing their fleets. Reports are sent directly to the nonprofit fleet manager.
• Educational booklets. Risk management educational booklets (available free on the Web site and in print) cover topics important to nonprofits.
Says Bradshaw: “In addition, we have a video/DVD lending library on such subjects as transporting individuals with disabilities, facilities safety, and improper sexual conduct awareness. We also offer discounted programs on background checks, child sexual abuse prevention training, and webinars on a variety of risk management topics. One of our newer products is BOARDnetWORK, an online board management tool that is available to our members for as little as $1 a day.
“We are very proactive regarding the delivery of our services,” she continues. “Our strategic principle sums it up best: ‘Inspired service and sensible products at the right prices, effectively and dependably delivered.’”
Kudos from brokers
It seems that brokers have already gotten the message. “Pamela Davis and her group are fantastic,” says Miller of Brown & Brown. “They offer a full range of products and services and are very competitive. We are one of the largest brokers dealing with nonprofits, so a stable market means a lot to us.”
Diane Durnin of JD Fulwiler in Portland, Oregon, echoes that view. “ANI-RRG is just fabulous. Their products and services are great, and their response time is unbelievable. Their dedication to the nonprofits arena is evident in the way they operate. They inspire loyalty among their members and brokers.”
George Gladis of St. Louis, Missouri-based Huntleigh McGehee says: “The group assigns the broker his or her own underwriter and claims person. Their products include more coverages than their competitors. Some insurers scale back on certain sub-limits, but they don’t. Their pricing is excellent. They just understand the nonprofits arena better.”
Davis, in discussing today’s soft market conditions, demonstrates little concern that competitive forces might hurt her group financially. “We started up in a soft market back in 1989,” she points out. “We have competitive prices and remain a stable market whatever the conditions out there. In the last hard market, we never gave in to the temptation to increase premiums even though the market would have supported it.
“Our operations are lean,” she continues. “We’ve enjoyed solid net income gains since our second year of doing business. NIAC declared a $3.7 million dividend last year, and I am going to recommend to the board a similar dividend this year.”
In 2006, Davis was named one of the “Women to Watch” in the insurance industry by Business Insurance. The “Women to Watch” feature highlights women leaders in commercial lines insurance, reinsurance, risk management, and employee benefits who are doing outstanding work that is drawing notice not only within, but also outside, their organizations.
In bestowing the designation, Business Insurance said Davis was being recognized for her leadership in founding the four companies that make up Nonprofits Insurance Alliance Group, bringing stability to the insurance marketplace for 501(c)(3) nonprofits.
Has Pamela Davis’s vision been realized? It certainly seems so. *