Abstract
Nonprofits are currently facing a slew of challenges that show few signs of letting up. The COVID‐19 pandemic and economic shutdown have caused many to see revenues drop, volunteers disappear and demand for services increase dramatically. While many are looking at new ways to raise funds and/or trim expenses, one source of relief they may not have explored is their insurance.
Nonprofits are currently facing a slew of challenges that show few signs of letting up. The COVID‐19 pandemic and economic shutdown have caused many to see revenues drop, volunteers disappear and demand for services increase dramatically. While many are looking at new ways to raise funds and/or trim expenses, one source of relief they may not have explored is their insurance.
According to Patrick Baker, nonprofit D&O Product Manager at Travelers Insurance, a nonprofit's insurance carrier can do a number of things to help them weather the current challenging climate.
“There's a number of different ways to structure policies to help meet their needs right now,” Baker told Nonprofit Business Advisor.
Although he specializes specifically in directors and officers liability policies, Baker said that many of the tips he offers can apply to the full range of policies that charities might have, including management liability, employment practices, fiduciary liability and criminal and cybersecurity coverage.
Baker shared the following examples:
They can explore the advantages of different coverage limit options, with lower limits leading to lower premiums.
They can ask for different deductibles—generally, the higher deductible, the lower the premium.
They can sign‐up for multiyear policies that allow them to lock in their premiums for an extended period instead of having to go through the lock‐in process all over again in a year.
If they are flush at the moment, they can prepay their policies in advance, which will yield additional discounts.
If they are short on cash right now, they can explore payment options that offer greater flexibility as to when they must pay their premiums.
These options will make sense for some organizations, and less for others, depending on their services and operations, as well as current financial circumstances, Baker said. But they are worth exploring as nonprofits look for ways to keep functioning under the operational and financial constraints that many find themselves in.
Another way that their insurers might be able to help is with education and training resources, Baker said. Travelers, for example, offers its policyholders free online access to a range of online materials that highlight the various ways in which COVID‐19 increases risk for underwriters. For example, as nonprofit employees transition to home offices and their organizations focus on virtual fundraising events, their cybersecurity risks increase substantially. Insurers— Travelers included—have put together primers for nonprofits that explain these risks and what organizations and their employees can do to mitigate them. Travelers even has a free hotline staffed by an employment attorney for its policyholders seeking legal advice about human resources issues, which could come up because of the new working arrangements that many employees of nonprofits are dealing with.
According to Baker, nonprofits can do several things that would help keep their premiums lower to begin with, including:
Taking a hard look at their budgets and identifying where their funding will be coming from in the short and medium term. Are they reliant on federal grant programs that might be sidelined to free up resources for the pandemic response? Have they figured out how to supplant virtual fundraisers for in‐person events, or otherwise replace the funding such events typically yielded their organizations? The more they can demonstrate their financial sustainability, Baker said, the better when it comes to underwriting.
Have an engaged board of directors. According to Baker, charities with informed and engaged boards look better to insurers because it signals better oversight—and more efficient and compliant operations.
Be good communicators. Finally, Baker said, nonprofits need to keep their insurance carriers informed about what they are doing to adapt to changing conditions, so their insurers can help them do so successfully.
Nonprofits should remember: Their insurance carriers want them to succeed in their missions and remain on solid financial ground. That's good for them and for the insurers themselves, and companies like Travelers and their industry peers are open to working with their clients however they can to ease the burdens they are facing right now.