At Linn-Benton Community College (LBCC) in Oregon, insurance premium rates were flat, or even declining, for five or six years. But that’s no longer the case.
For the fiscal year that started on July 1, LBCC’s premium for property insurance went up 23 percent, and the liability insurance premium jumped 19 percent.
“You have to absorb the cost,” says Sheldon Flom, LBCC’s vice president for finance. “You don’t have a choice. You have to have the proper coverage.”
Market analyses of insurance premiums
An analysis of the insurance market by the brokerage and consulting firm Arthur J. Gallagher & Company, which reports serving 20 percent of the nation’s community colleges, shows higher education premiums for property insurance, general liability insurance and educators’ legal liability rising by anywhere between 10 percent and 35 percent over last year’s rates. Excess liability insurance, a type of insurance that covers claims beyond the limits of general liability insurance, is up between 25 percent and 50 percent, according to the market research.
The analysis cites “covid concerns” as a contributor to liability coverage premium increases.
John McLaughlin, senior managing director in Gallagher’s higher education practice, says that unease regarding potential future claims arising from COVID outbreaks on campus is certainly a driving factor.
Yet he notes that a number of other factors are contributing to the premium increases across the community college and higher education sectors. Among them are weather-related disasters, sexual abuse, Title IX issues and, for campuses with athletic programs, traumatic brain injuries.
“Before COVID, there were major issues and serious losses,” he says, noting that those risks are still present and driving rates up.
In Flom’s experience, LBCC’s insurance agent attributed the property coverage premium increase to insurers needing to reconstitute their reserves after the devastating wildfires and hurricanes of the past two years drained assets.
Christopher Schwyter, a senior vice president in the higher education practice of insurance brokerage firm Willis Towers Watson (WTW), affirms that several lines of insurance coverage are becoming costlier, notably excess liability coverage. He adds that while he has not seen many insurers explicitly write into policies communicable disease exceptions or pandemic event exclusions, insurers are asking more diligent risk-management questions of colleges about the actions that they will be taking this fall to protect campus populations.
While most carriers are still willing to take on the insurance risks of higher education institutions, Schwyter says that they are keeping an eye on evolving case law and “want to make sure that institutions are proactive in maintaining the highest level of protections in light of the pandemic.”
In Houston, higher premiums likely
Robert McCracken, executive director for risk management at Houston Community College (HCC), has heard of 20 percent to 30 percent increases for liability coverage, and “some really scary” jumps of up to 70 percent for excess liability policies carrying high coverage thresholds.
In planning ahead to when HCC’s insurance policies come up for renewal in early 2021, HCC has budgeted an additional 10 percent of funds for insurance over last year’s amount, yet further allocations may still be necessary. Should that be the case, absorbing the expense will be especially challenging, as HCC’s budgets are squeezed by reduced state appropriations, skyrocketing cleaning costs and potentially decreased tuition revenue, McCracken says.
“Ultimately, you’d have to cut expenses somewhere,” he says.
Flat premiums elsewhere
Yet not all institutions are experiencing skyrocketing premiums. In Michigan, Mott Community College (MCC) saw no significant rate increase when the college renewed its insurance policies on July 1, according to chief financial officer Larry Gawthrop. MCC’s payment structure is complex and includes an end-of-year refund that effectively lowers the net cost of insurance, yet because the refunds are typically small, Gawthrop expects no major changes year-to-year in the college’s insurance costs.
Meanwhile, the Community College of Philadelphia (CCP), during its recent renewal round, was able to stave off insurance premium hikes. One of its incumbent carriers as well as a number of competing carriers proposed higher rates for several liability coverages. Yet CCP’s broker was able to identify a carrier specializing in public education who was eager to re-enter the Philadelphia market with an advantageous rate offering.
“We advocated for ourselves, and our broker advocated for us,” says Jim Spiewak, CCP’s associate vice president for budgets and business services.
These two cases suggest that higher insurance premiums are not inevitable for all community colleges and that institutions can leverage variable pricing in the market to secure the most advantageous prices and coverages.
Lucky to have pandemic coverage
LBCC stands out in expecting a cushion for paying higher rates that most other colleges can’t count on. By happenstance more than by any crystal ball foresight, LBCC held insurance pre-coronavirus with coverage for pandemic-prompted business closures.
The coverage “just happened to be one of the lines included in our policy,” Flom says. “We lucked out.”
As a result of this coverage, LBCC will likely recoup some funds, according to Flom. He predicts that the final compensation amount will be well less than what the college would have normally generated from classes that were cancelled and from auxiliary services that were shuttered, yet any compensation at all is much greater than what most colleges can count on.
Mitigating risk through legal protections
As colleges formulate their plans for this fall, policymakers in Congress and state capitals have considered legislation that would shield colleges acting in good faith and with responsible health and safety protocols from liability should students or others sue after falling ill from coronavirus.
Schwyter of WTW indicates that such legislation could result in lower rates for community colleges, though he notes that much hinges on the exact stipulations of the legislation and under what circumstances it appears likely to be upheld by the courts.
Several states have already passed such liability shield legislation, according to a tracker produced by law firm Ogletree Deakins. Other states, including Texas, have existing laws on the books that limit or put financial caps on the liability exposures of community colleges.
“I would love to have some protection,” expresses Flom of LBCC. Yet he and the other interviewed college leaders recognize that even with legislative liability shields, aggrieved parties will still sue, claiming that responsible care protocols were not in place or were negligently not followed.
McCracken doesn’t want HCC to be the subject of one of those lawsuits, so he reaffirms the bedrock principle of risk management: “Institutions need to do as much as they can to keep people safe and to mitigate the risk upfront.”