Three Steps to Effective Board Oversight of Insurance
Be sure that your nonprofit is getting the most value out of your relationship with your broker, and with your insurance companies.
Guidelines for board members who want to make sure their nonprofit has appropriate insurance coverage.
As a board member, it is your responsibility to understand your group’s insurance needs and help make sure you have the right coverage. Here are guidelines for board members who want to make sure their community nonprofit has appropriate insurance coverage.
1. Monitor suits, threats of suits, and accidents.
The board (or a risk management committee of the board) should be informed of any insurance claims made against the nonprofit and when threats of suits arise.
In some organizations it’s appropriate for the board to set goals and monitor progress on safety and risk reduction, such as reports on the number and type of automobile accidents and whether there were injuries, and what might have been done to prevent the accident.
2. Periodically review risks, risk reduction practices, and coverages.
Depending on the size of the organization, the board, a board committee, a board-staff task force, or other group should develop a list of the key risks faced by the nonprofit and have a process to periodically review incidents or claims.
Obvious areas of concern are driver selection and training, policies to protect vulnerable clients, and potential for fraud and damage to property.
Less obvious risks are potential damage to reputation and staff morale from poor management.
Your insurance broker should be able to assist with identifying the most important risks to address.
3. Review and consider changing brokers.
Every few years, the board should review its relationship with its broker, just as it reviews the relationship with the auditor.
In this review board representatives should look over what coverages are being purchased, at what rates, from which insurance companies, and whether the nonprofit is getting the services (such as prompt payments) it deserves.
We at NIAC and ANI-RRG are proud of the other services we provide free or at low cost to the nonprofits that insure through us: services such as driver training and monitoring (for organizations with vehicles), informational booklets (such as the issue of serving alcohol at special events), webinars on risk reduction, and others.
Be sure that you are getting the most value out of your relationship with your broker, and with your insurance companies.
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- A Cautionary Tale: Overcoming Governance Nightmares in Nonprofit Organizations
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About the Author
Pamela Davis is the founder, president, and CEO of an affiliated group of nonprofit insurers known as Nonprofits Insurance Alliance® (NIA), the publisher of Blue Avocado. Pamela has grown NIA from a loan of $1 million from a group of foundations to over $229 million in premiums and $713 million in assets, serving over 24,000 nonprofits across the country. All NIA affiliates are 501(c)(3) nonprofits, just like the organizations that they insure, and all NIA assets belong to the community, just like they should! Follow her on Twitter @pamela_e_davis
Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. The opinions and views expressed in this article are solely those of the authors. They do not purport to reflect or imply the opinions or views of Blue Avocado, its publisher, or affiliated organizations. Blue Avocado, its publisher, and affiliated organizations are not liable for website visitors’ use of the content on Blue Avocado nor for visitors’ decisions about using the Blue Avocado website.
I am a member of a private family cemetery Board of Directors. We have no legal status as a nonprofit. Should we establish such status? Also what kind of insurance protection do we need? There are no employees; we just try to collect money from family members to maintain the cemetery.
What I like about the above suggestions are that 1 & 2 have nothing to do with the purchase or placement of insurance. Remember that insurance is simply a mechanism to finance a loss that's all. It's a financial instrument. The person who answered this post understood that the cost most folks pay for insurance has a direct correlation to their claims results. Impact and drive down claims, and everything else follows. This is especially true as it relates to Workers Compensation Insurance which is essentially a high interest loan courtesy of the insurance carrier. In many cases on small workers compensation claims you end up spending considerably more in direct cost (insurance premiums) & indirect costs (lost productivity, training, and overtime of employees) than the actual payout by the carrier. Focus on the disease ( risk & insurance related losses) , and NOT on the symptoms (high insurance premiums). The one will take care of the other if dealt with in proper order. Michael Stoop – Metropolitan Risk Advisory
What I like about the above suggestions are that 1 & 2 have nothing to do with the purchase or placement of insurance. Remember that insurance is simply a mechanism to finance a loss that's all. It's a financial instrument. The person who answered this post understood that the cost most folks pay for insurance has a direct correlation to their claims results. Impact and drive down claims, and everything else follows. This is especially true as it relates to Workers Compensation Insurance which is essentially a high interest loan courtesy of the insurance carrier. In many cases on small workers compensation claims you end up spending considerably more in direct cost (insurance premiums) & indirect costs (lost productivity, training, and overtime of employees) than the actual payout by the carrier. Focus on the disease ( risk & insurance related losses) , and NOT on the symptoms (high insurance premiums). The one will take care of the other if dealt with in proper order. Michael Stoop – Metropolitan Risk Advisory
No employees. I need D & O insurance.