Risk Management: STRETCHING Your Insurance Budget

Risk Management

By Ed Schirick

Change puts pressure on all of the resources of your camp business. Sometimes
change comes from within. But often change is imposed on us from events
external to our organizations and lives.

Developing coping strategies for managing change is an important business
management task. Recent changes in the economy, in the level of charitable
contributions, and in the cost and availability of insurance are examples
of change imposed on us from external sources. Under these circumstances,
many camp directors are asking how they can continue their risk management
efforts and get the most value for their insurance premium dollar.

The following are some suggestions:

General

  • Make a commitment to risk management — this includes your board
    of directors, if you have one. Successful risk management programs are
    the result of long-term commitment from camp leadership, directors,
    and staff. Resist the temptation to stop training, and reduce your organization's
    commitment to risk management in the face of changing circumstances.
  • Choose a knowledgeable insurance agent or insurance broker to advise
    you and help you navigate the insurance marketplace. A knowledgeable
    insurance representative can make a difference in changing circumstances.
  • Educate yourself — find out what factors influence the cost
    of your insurance. Pay attention to them.
  • Educate your agent/broker. Make it clear what you want your insurance
    program to do for your business; identify risk factors in your business
    for your agent/broker and highlight how you manage them; and stress
    what distinguishes your camp as an above-average risk.
  • Focus on constant improvement.
  • Don't bid your insurance too often — and when you do, set the
    specifications for all bidders.
  • Don't buy insurance using price as the primary criteria. There are
    differences in the insurance policies, the insurance companies, and
    the insurance brokers. Insurance is not a commodity!

Property

  • Consider higher deductibles. Establish deductible funds in your budgets
    to pay for anticipated losses. Don't trade dollars with the insurance
    company. Frequency of loss is a "red flag" for underwriters.
  • Consider insuring only key buildings for replacement cost, and cover
    other buildings on an actual cash value, or depreciated value basis.
    Property insurance rates are proportional and costs will decrease accordingly.
  • If you haven't secured a property appraisal recently, try to fit
    the cost of one into your budget as quickly as possible. Insurance of
    appropriate value on buildings is an issue all insurance companies are
    concerned about. Don't buy too little or too much property insurance.
  • Investigate property extension/enhancement endorsements some underwriters
    offer. These "package" endorsements may be less expensive
    than purchasing the coverage individually. These "package"
    endorsements may not be cost effective for everyone, so make sure you
    do a cost benefit analysis.
  • Investigate loss-of-income and extra-expense insurance — take
    the time to develop your limit using a loss-of-income worksheet. Take
    some time to understand how it works. Camp directors have a tendency
    to either under estimate this risk — or over insure.
  • Take the time to understand how your property insurance works in
    a catastrophic situation — such as a forest fire — that
    causes widespread damage and destruction — and on a more localized
    basis such as if your dining hall is destroyed.

General Liability

  • If your policy is subject to audit, make sure you know how the underwriter
    defines a "camper day." If your policy is not subject to audit,
    make sure that the insurance company is using the correct camper days
    to calculate your premium.
  • Perform the most comprehensive criminal background check available
    in your state on employees and volunteer staff. Insurance companies
    are establishing criminal background checks as a minimum requirement
    for sexual abuse and molestation liability insurance.
  • Consider using independent contractors for certain risky activities,
    such as horseback riding, rock climbing, and whitewater rafting. Make
    sure your underwriter knows how you are managing these activities.
  • Request additional insured endorsements and certificates of insurance
    from all independent contractors who conduct programs in your name,
    or come on your premises.
  • If you have more than one location (i.e., camp and an off-premises
    office or two — or more camp locations), ask to have the designated
    locations general aggregate endorsement attached to your policy.

Automobile

  • Re-examine the use of fifteen-passenger vans in your program —
    consider options that may afford less rollover risk and more side-impact
    protection; find out what your insurance company's risk appetite is
    for fifteen-passenger vans.
  • Check/confirm use classifications for all vehicles, including territory
    of principal garaging.
  • Keep personal-use vehicles off the camp fleet, if possible. Purchase
    personal auto insurance at appropriate limits.
  • Consider higher physical damage deductibles on collision and other
    than collision (comprehensive); drop physical damage when a vehicle
    becomes ten years old.
  • Use independent contractors (dealers or service stations) to maintain
    your fleet, if possible. This approach transfers some of the risk of
    maintenance and repair to the independent contractor.

Worker's Compensation

  • Check actual loss experience against the experience-modification
    worksheet annually.
  • Consult with your agent to make sure payroll is assigned to the proper
    codes — split where appropriate; discuss pros and cons of excluding
    executive officers in private businesses.
  • Make sure executive officer payroll is limited according to your
    state's rules, so you don't overpay.
  • Consider taking a deductible on medical payments, if permitted in
    your state, to reduce the frequency of minor medical only claims.
  • Investigate various workplace incentive discount programs, such as
    a drug-free workplace, to reduce rates.
  • Create an employee safety committee. In the final analysis, safety
    pays off through experience-modification credits and other discounts.

Umbrella/Excess Liability

  • Consider buying higher primary limits, if available. Instead of $1,000,000
    each occurrence and $2,000,000 general aggregate, try to buy $2,000,000
    each occurrence and $4,000,000 general aggregate on general liability,
    for example.
  • Beware of claims made insurance — keep your eyes open and know
    what you are getting into before buying any claims made insurance coverage.
  • Ask that the cost of each layer of umbrella insurance or excess insurance
    premium be broken out so you can see the price per million. Minimum
    premiums for upper layers have been increasing substantially. Consider
    the cost under your circumstances.
  • Make sure worker's compensation employers liability is being scheduled
    as underlying insurance in your umbrella or excess policy. We are seeing
    some companies exclude employer's liability, failing to list it as underlying
    insurance.

If you find yourself in a spot where you need to cut back and eliminate
certain policies or reduce limits, "don't throw the baby out with
the bath water." Take the time to make informed decisions by looking
back at the types of losses your camp has experienced in the past. Remember,
if you eliminate risk transfer (insurance), the risks don't go away. Try
to find another way to reduce and manage them.

Camp operations are very similar. Underwriters call them homogeneous.
While this may be true, individual camp operations are quite different.
Manage your underwriter's view of your operations by sharing the facts
about how you manage risk and what you do that distinguishes your camp
from others. Challenge your insurance agent or broker to communicate this
and be your advocate. Challenge your staff to live your risk management
plan and improve upon it wherever and whenever they can.

Ed Schirick is president of Schirick and Associates Insurance
Brokers in Rock Hill, New York, where he specializes in providing risk
management advice and in arranging insurance coverage for camps. Schirick
is a chartered property casualty underwriter and a certified insurance
counselor. He can be reached at 845-794-3113.

 

Originally published in the 2004 July/August
issue of Camping Magazine.

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