Nonprofits pay higher insurance premiums if they have more claims or larger claims than other nonprofits with similar operations. 

• Board members should encourage a corporate culture prioritizing safety and protection of property
   

• Administrative staff should review all claims and attempt to develop prevention strategies.  Claims and incidents summaries should be reported to the board on a regular basis

Free loss control information is available at:

▪    The Nonprofit Risk Management Center
     www.nonprofitrisk.org/

 

▪    Charity First
     www.coveragefirst.com/portal/communities/community.asp?UserID=2&CommunityID=1664
       (click on ‘risk management resources’)

 

 ▪    Alliance of Nonprofits for Insurance, Risk Retention Group (ANI-RRG)
     www.ani-rrg.org/dcPage.cfm?PageBaseID=50120

 

▪    The National Safety Council
     www.nsc.org/

• Administrative staff should choose a nonprofit’s insurance agent without board pressure or influence.  Any other arrangement eventually results in higher premiums.  When administrative staff can hire and fire an agent, the agent will be working for them rather than the other way around.
   

• From 101 Ways To Cut Business Insurance Cost without Sacrificing Protection: “Some agents will attempt to ‘go over [administrative staff’s] head’, and this can cost the organization considerable amounts of money…Only in very rare situations will an agent chosen...because of family, social, or business relationships perform the quality services a particular organization deserves.”  page 94 copyright 2002 International Risk Management Institute, Inc.

Specialist agents and brokers have extensive experience placing insurance for nonprofits, and are more consistent than non-specialists in providing competitive premiums.

The phenomena of agent specialization first appeared in the 1970’s.  Initially viewed as merely a marketing technique, there’s now a wide consensus that specialization provides significant value.

Examples of some independent opinions:

• “The most important qualification a nonprofit should seek in its insurance professional is experience working with other nonprofit organizations.”  Managing Risk in Nonprofit Organizations: A Comprehensive Guide page 260, copyright 2004 John Wiley & Sons
   

•  “One of the most effective steps you can take to reduce business insurance costs is to choose an insurance agent [with]…industry expertise.” 101 Ways To Cut Business Insurance Cost without Sacrificing Protection page 94 , copyright 2002 International Risk Management Institute, Inc.
   

•  “Select an…insurance agent…knowledgeable about the specific insurance needs of the nonprofit industry”  Saving Money in Nonprofit Organizations page 77, copyright 1998 Jossey-Bass, Inc.

• Complete all applications in full.
   

• Explain any discrepancies between your Website and information entered on your applications.
   

• Answer all underwriter follow-up questions as quickly and completely as possible.
   

• Review your insurance company’s claims history reports before submitting applications.
   

• Provide details of your loss control initiatives, especially remedial responses to specific claims.

• Number of Bidders – There’s rarely any advantage to having more than one or two bidders in addition to your current agent. Many of the best agents will decline to participate if there are too many bidders.
   

• Choosing Bidders – The best sources for identifying good potential bidders are associations that you belong to, or colleagues at nonprofit organizations similar to yours.  The Nonprofit Risk Management Center can also be a resource in identifying specialist agents and brokers  www.nonprofitrisk.org/.
   

• Assigning Markets – At least 60 days prior to renewal, bidders should report their choice of insurance company to you for your authorization.  Normally the incumbent broker is given first choice, which will usually be your existing insurance company. No bidder should initially be assigned to more than two insurance companies.  After the markets have been assigned, if any of the bidders request permission to approach additional unassigned markets, there’s no harm in allowing them to do so, as long as they identify the markets. 
   

• Bidding Specifications – It’s not necessary to develop bidding specifications. Bidders should quote against your existing coverage, and provide you with a comparison of their proposed coverage and your existing coverage, when they present their formal proposal.
   

• Transparency – Efficient competitive bidding requires transparency.  No bidder should have access to more information than any other bidder.  All bidders should be told the identity of the other bidders and their markets.
   

• Broker of Record Letters – You may need to issue a Broker of Record Letter to give a bidder access to an assigned market.  In the rare additional circumstance when a Broker of Record Letter might be necessary a new bidder should be assigned never an existing bidder.
   

• Current Policy Information – Full information on your expiring policy should be disclosed to non-incumbent bidders, including any changes since the policy effective date.
   

• Completing Applications – It’s common to underestimate the amount of effort necessary to complete insurance applications.  When seeking bids, it’s especially important to make sure that sufficient time has been allocated.  In addition to completing applications, you’ll need to ask your incumbent broker to send you insurance company print-outs of your claims history for the past five years.  Receipt of the print-outs should take a week at the most.  You may also want to prepare a narrative briefly describing any risk management procedures you’ve initiated.  Return completed applications to the bidders at least 45 days prior to renewal.
   

• Bidder Access to Decision Maker – All bidders should have access to the person who has the ultimate authority and responsibility for choosing the winning bid.   You also should have complete transparency internally as to who the ultimate decision maker is.
   

• Formal Proposals – All proposals should be in writing.  In addition to premium amounts, the proposals should include a comparison of the proposed coverage and your expiring coverage, and a written explanation of any coverage or service issues that might influence your decision in choosing the winning bid. 
   

• Cut-Off Date for Proposals – A cut-off date for accepting proposals should be established at the beginning of the bidding process.  The date should be at least three working days prior to the renewal date of your policy.
   

• Evaluating Proposals – The best way to evaluate proposals, other than merely taking them at face value, is to let the competing brokers do it for you.  You should always comply with bidders’ requests to review other bidders’ proposals.  If a bidder has criticisms of the other proposals, you should request that their criticisms be in writing.  It’s not inappropriate to take factors other than price and coverage into consideration, such as a broker’s insurance expertise, experience working with nonprofits, or your perception of a broker’s trustworthiness.  Keep in mind that any broker is going to promise good service.
   

• Final Look – If you’re satisfied with your incumbent broker, and if another bidder has submitted a better proposal, it’s not inappropriate to allow an extra day for the incumbent broker to try to negotiate lower premiums or better coverage.