Author: John W Murphy
Sometimes the insurance marketplace simply doesn't offer attractive options to meet the insurance needs of a group of nonprofits. Maybe there's no willing insurer, or premiums are sky high, or the coverage is inadequate, or the service is poor.
In cases like this, nonprofits can come together to form and fund a shared risk pool — essentially their own insurance company.
How do you know if a pool is a good solution for your organization? Read on to learn more.
A risk pool is a grassroots solution to risk management
The risk pool stabilizes long-term costs, reduces risks and increases safety for participants. In short, the pool provides high-quality, holistic risk management for the group of nonprofits, not just insurance as a commodity.
As an added bonus, a risk pools allows participants to spend more time on their mission and less time worrying about managing risk.
The top three reasons to form a risk pool
A risk pool offers financial stability, tailored coverage and program ownership.
Financial stability
- Pools offer predictable, sustainable premiums for coverage year over year, not the dramatic price swings more common in the for-profit commercial insurance market.
- Nonprofits have the potential to accumulate surplus in a pool, which can protect against catastrophic losses, help keep rates low and fund special risk-reduction programs for participating organizations. In traditional insurance, any surplus goes to private shareholders.
- Participating nonprofits are permitted to invest the pool's resources to produce additional income and reinvest it to benefit the pool's members.
Tailored coverage and services
- Through their pool, nonprofits receive access to coverages, policy limits and services needed for critical business functions. This coverage often extends to less typical risks not covered favorably by traditional carriers, such as primary liability for key volunteers, security operations liability and worldwide liability extensions.
- Pools also focus on innovative coverages to help nonprofits manage evolving risks. Examples include sexual abuse and molestation, religious freedom/religious expression liability, cyber, and Directors and Officers (D&O).
- Pools offer specialized claims handling and service when coverage is triggered — rather than a "generic" claims handler, someone who understands nonprofit culture and member missions manages claims.
Program ownership
- Pools are member created, member owned, member governed, and member focused, so members have a powerful voice in setting the pool's current policies and vision for the future. It also means that members can involve themselves deeply in risk management if they wish, or can choose to defer to a pool administrator and free up more time for core nonprofit activities.
- Because pool members own the program, they can prioritize investing in loss prevention and member education rather than just paying claims. Examples might include cybersecurity support services, training/certification programs and regulatory compliance reviews.
- Nonprofits in the pool can collaborate to help create, foster and manage safe environments among members, collectively minimizing damages and losses.
Find out more about risk pools
To learn more, check in with in with Risk Program Administrators (RPA), a division of Gallagher. RPA specializes in helping you manage your risk, your way. RPA's extensive network of 300+ professionals combines over four decades of experience, cutting-edge knowledge of emerging risks and industry-leading data to bring you customized, innovative risk management solutions and pooled programs for your nonprofit. Learn more at RPAdmin.com.
