Brokerage Study Finds Need for Risk Managers

By: | September 15, 2013 • 3 min read

Caroline McDonald reports on risk management and the insurance industry. She can be reached at [email protected]

R9-15-13p12_BrokerPg.inddU.S. nonprofit organizations, hampered by the economic downturn and tight budgets, often lack dedicated risk managers and appear to be under-buying insurance. But boards of directors frequently pick up the slack, questioning limits, coverage amounts and vulnerabilities.

Entities also are thinking more strategically and, like their publicly-traded partners, are investing in enterprise risk management.


In a survey released in June, Nonprofit Risk Management, Crystal & Co., an insurance brokerage firm, found that only 22 percent of nonprofit organizations surveyed have a dedicated risk manager.

The study was conducted among senior executives of U.S. nonprofit organizations with revenues of more than $20 million, and included human services, educational, religious foundations and community services organizations.

The study revealed that, for the majority of organizations surveyed, responsibility for corporate risk and insurance was handled by the entity’s finance team, human resources, operations or legal departments.

The study also found that organizations are buying the minimum coverage and may not be adequately protecting themselves. The majority of respondents noted that annually they spend less than 0.25 percent of revenue on corporate insurance. For adequate coverage, the percentage should be closer to 1 percent, the survey said.

Jason Tharpe, Aon Affinity vice president in Washington, D.C., who works exclusively with nonprofits across the country, said that larger nonprofits, along the lines of the YMCA, are organizations that would be most likely to have a risk manager. Larger health-focused programs, such as nursing homes, he added, also typically employ risk managers.

The vast majority of nonprofits, however, are smaller than the $20 million threshold. “We deal with a lot of small and medium nonprofits and there’s no doubt about it, none of them have [dedicated] risk managers,” said Tharpe.

The risk manager of a nonprofit, if there is one, functions as the insurance buyer. Otherwise, the chief financial officer or even the chief executive officer handles insurance buying decisions, Tharpe said.

That puts boards of directors of nonprofits in a key role in insurance buying. CEOs and CFOs are often asked about insurance coverage by their boards, who want to know if the entity is insured to adequate limits.

“The board is pushing down on them to ask the proper questions in those smaller organizations without risk managers.”
— Jason Tharpe, vice president, Aon Affinity 

As for whether these organizations are, indeed, adequately covered, “there are levels where some may be underinsured, but in terms of D&O, we write a lot of that,” he said. “We write over 12,000 organizations throughout the country,” which generally have broad policies.

Smaller organizations with more liability exposure, “are buying professional liability, which is usually wrapped up with their general liability insurance — and that they are pretty cognizant of,” Tharpe said.

He added that recent headlines have caused organizations to look more carefully at what they may and may not be covered for. “For example, the Sandusky issue at Penn State obviously brought to light the need for sexual molestation coverage, so that was on a lot of nonprofits’ minds for a while.”

Carol Fox, director of Strategic and Enterprise Risk Practice for the Risk and Insurance Management Society is optimistic about nonprofits: They are becoming more mindful of their reputations and are thinking strategically about their organizations.

With economic recovery in progress, many nonprofits are shifting from survival mode to long-term sustainability and growth she said, citing findings from a study by Grant Thornton, the 2012 National Board Governance Survey for Not-for-Profit Organizations, based on online responses from 706 board members and senior executives of nonprofit entities.


She also noted that regulations in some industries are dictating that nonprofits take their organizational risks more seriously.

“Enterprise risk management (ERM) is just beginning to ‘get legs’ at nonprofits,” which are beginning to “play catch-up to publicly traded companies,” she said.

Fox said that boards of larger organizations are also becoming more supportive of hiring risk professionals, “because they have more than just insurance to worry about.”

“From those I’ve talked to,” she said, “their reputation drives whether or not they will get funding from their donor base and whether they are able to reach out to the communities they are trying to serve.”

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]