Nonprofit managers are well aware of the need to minimize risk, but often they do not know how to do that.
A white paper published by HUB International argues that many nonprofit executives still fall into the trap of simply “buying insurance” as their sole risk management strategy.
The white paper offers five simple, consistent practices to keep trouble away.
1. Consider the big picture. When HUB International asks nonprofit leaders to define their cost of risk, they invariably cite “insurance premiums” as a synonym. But that’s a partial answer – the tip of the iceberg.
2. Strategy first – insurance last. Commercial insurance should be the court of last resort in any holistic risk-management plan. It’s just a way to pay for bad things that happen.
3. Look off the beaten path. Everyone considers the traditional subjects of insurance, but the state-of-the-art in insurance product design has shifted along with judicial and regulatory environments.
4. Sweat the details. No two insurance policies are created alike. Competing offerings may purport to cover the same risks, but “The devil’s in the details” – that is, in the fine print of each contract’s declarations, insuring agreement, conditions, and exclusions.
5. Avoid “Bidding insurance.” Some buyers fall into the trap of commoditizing insurance, shopping it relentlessly through multiple agents and brokers as if they’re buying a car. While prudent stewardship demands that any business operator look for ways to trim cost and maximize value, “bidding” generally isn’t a successful strategy.