I'd like to be able to say that as a shrewd and well-organizedagent, I woke up one morning many years ago and decided, “Today I'mgoing to get into the social-service agency niche.” Rather, thetruth is that one of my accounts happened to be a sizablesocial-service provider in the New York City area, and through it Igained referrals to several similarly large organizations.Eventually, I did wake up one morning and realized thatI'd become a specialist in this market.

And I'm glad I did. Given that large social-service agencies canpay $100,000 or even much more for insurance, this niche cangenerate significant revenue for an agency, although it alsorequires constant vigilance. I have comparatively fewsocial-service clients, but they account for a third to a half ofmy production. Servicing them also often takes up half of my day.It's time well spent, however, in terms of helping theseorganizations perform their valuable work while also benefiting ourbrokerage.
Plus, I simply like to stay involved. While I do have support forservicing accounts, I still keep in close contact with clients. Ifeel that's important to retaining their business and obtainingreferrals from them.
The services provided by my social-service clients can be describedas transitional housing. This encompasses shelters for thehomeless, victims of domestic violence, mentally challengedindividuals and substance abusers. It also includes foster homesand even certain types of correctional facilities (e.g.,alternative environments to prison for youthful offenders). Someoperations go beyond transitional housing into low-income housingfor people who have “graduated” from a facility. They may stillreceive some social services, but they also have jobs, pay rent andhave resumed their places in society.
At first glance, coverages for the agencies' exposures mirror thoseof typical commercial or residential establishments. Nonetheless,there are a few significant differences. One is in regard toprofessional liability. Rather than only temporarily house and feedpeople, social-services agencies also attempt to break the cycle ofbehavior or circumstances that brought people needing food andshelter to the agencies in the first place. So they providelearning centers for job-skills training and GED classes,babysitting to enable parents to look for jobs, personal counselingand other services designed to help people enter the work force.The counselors, social workers and teachers providing theseservices need professional liability coverage. Additionally, manysocial-service agencies directly or indirectly provide varyingtypes of medical care, so doctors, nurses, psychiatrists andtechnicians also need coverage.
Another specialized coverage is sexual molestation and abuseinsurance. People living and working in transitional housinginteract in close quarters, and there is heightened risk ofallegations of sexual molestation under such circumstances.
Social-service agencies typically engage in a lot of fund-raisingactivities and sometimes require special events coverage inconnection with them. Also, to attract prominent individuals to siton an organization's board of directors–a goal for mostsocial-services agencies–they must be able to offer them adequateD&O protection, since such individuals can be held personallyliable for claims. Frequently, employment practices liabilityinsurance is made part of the D&O coverage. EPLI certainly isnecessary, since social-service agencies run the same risk oflitigation charging discrimination, wrongful termination or sexualharassment as other employers do–if not more.
Working with underwriters
As might beexpected, the loss experience of transitional housing agenciesoften falls well short of the ideal, so underwriters are cautious.We have to be thorough in collecting information for submissions.On the property side we ask clients for a list of the locations andvalues of any buildings they own and the value of their contents.On the liability side, we need a description of buildingoccupancies and the types of programs operated at each. If abuilding is residential, we need to know the number of units orbeds it has. If it is used for offices, we need to know its squarefootage. If it is used for summer camps, we need to know the numberof “camper days” (the number of campers multiplied by the number ofdays) the agency conducts. We may be able to obtain some of thisdata from social-service agencies' Web sites, which often containtremendous amounts of information.
Underwriters like to see employee handbooks, safety manuals andrisk management manuals. Sometimes we help agencies obtainthem.
Extensive employee background checks are crucial; in fact,professional liability and sexual molestation coverage usually isconditional upon them. Anyone interacting with children–securitypersonnel included–needs to be fingerprinted. Given thevulnerability of transitional housing residents, all personnelserving them must be screened thoroughly.
The auto liability exposure is also considerable. A social-serviceagency might own 15 vans, each capable of carrying 12 to 15 people,so driver information, including MVRs, will be closely examined.Descriptions of the vehicles–year, make, model, where they'regaraged–are necessary. Location can be a factor. If those 15 vansare being driven daily in the congestion of New York City, therates will reflect the heightened risk of accidents.
Carriers aren't shy about sending out inspectors for site visits.If they make a recommendation for mitigating a risk, they wantconfirmation that it has been taken seriously. Failure to correctroutine hazards like poor lighting in a stairwell or broken curbsshows that maintenance isn't a high priority, and the underwriterwill calculate accordingly.
Above all, underwriters require five-year hard-copy loss runs. If aclient's loss experience has been poor, the broker must be preparedto show the specific steps the client has taken to ensure it willimprove. For example, perhaps there have been losses at a locationthat wasn't well maintained or supervised. If that location hasbeen sold, or if the activity that led to claims no longer takesplace there, the broker can point this out to the underwriter and afair premium can be reached.
For the broker, staying on top of their clients' loss experience iscrucial. When there are claims, the broker should have a game planfor responding to them–small claims cannot be allowed to become bigclaims. The broker must ensure that the adjuster gets all theinformation he or she needs, that accurate information fromwitnesses is collected, and that communication is maintainedbetween insured and insurer.
We conduct quarterly claims audits with the senior staff of oursocial-service clients. A claims manager from our agency also takespart. Our goal is to obtain information from these meetings thatwill help the insurer's adjuster close claims, because the longerthey remain open, the higher the eventual loss often will be. Wealso work with insurers to see that reserves on clients' losses arereasonable and are reduced when the data indicate they should be.Managing clients' claims is a year-round job–and the only one ourclaims manager has. A broker can't wait until three months beforerenewal to look at claims and expect to keep an account.
Social-service agencies face many exposures, some quite unusual.Consequently, a program is often the best option for covering them,since coverage is customized to insureds' risks. Conventionalprograms usually include property, general liability, autoliability and sometimes professional liability insurance. Coveragegenerally is provided on admitted paper. Absent uniquecircumstances, an insured often can qualify for more underwritingcredits–and hence obtain a lower premium–by obtaining coveragethrough a program than by purchasing policies separately. Theprogram markets I've used to insure social-service agencies includeNIF Group, Philadelphia Insurance Co., AFC Insurance and AIG. Ihave good relationships, built on trust and credibility, with keyunderwriters at all these markets, and those relationships arevital to my success.
Naturally, every client wants to save money, but predictableexpenses are particularly important to social-service agencies,since most have tight budgetary constraints. If you're unable toplace a social-service agency with a program–perhaps the agency'sloss experience has been adverse–and have to resort to the E&Smarketplace, you may be hard-pressed to put something together theclient will consider affordable or even desirable. First, you mightnot find all the coverages you need; second, clients may have toaccept deductibles as high as $25,000, as opposed to having nodeductible at all. Social-service agencies like their insurancecosts to be fixed. Rather than try to budget for a deductible thatthey may or may not have to absorb, they want to pay a premium andhave the carrier cover 100% of all losses.
A program generally isn't sufficient to cover all of asocial-service agencies' needs. Often the D&O and EPL coveragemust be arranged separately. Agents can turn to any number ofinsurers that offer D&O for nonprofit organizations. Programsdon't include workers compensation insurance either, since theexposure for social-services agencies differs little from that ofother employers and will be reflected in individual employee classcodes. A broker can turn to markets like Liberty Mutual, AIG,Wausau and Zurich to obtain this coverage separately.
Social-service agencies tend to be stable clients. They aresophisticated enough to take a long-term view of insurance and tobelieve in partnering with insurers. They rarely jump to anotherbroker just to save a little premium. They expect their brokers tobe vigilant, however, and to inform them of new products andotherwise look out for their interests.
In our experience, social-service agencies more often move theiraccounts because of dissatisfaction with a broker than with price(although we do monitor price closely). Since the programs arealmost always well-written, competing for an account can't often bedone on the basis of finding gaps or catching errors in the currentcoverage. Occasionally sexual abuse insurance will be absent orbuildings will not have been appraised for years, but there are few“aha!” moments when looking at existing policies. Rather,convincing a client to move their business generally is a matter ofsolving a particular problem for them.
Say an agency has a large fleet of vans in New York City, and thecurrent insurer has doubled the premium. If you can be innovative,and realize that an auto insurer with more transportationcapability is a better fit for that particular line of coveragethan the program the prospect currently is in–then you've shown youcan solve a problem. The social agency develops a level of trust inyou, and the following year you might be given the opportunity tocompete for the rest of the client's account.
Indeed, the existence of a problem is one of the key things I lookfor before deciding to put in the time and effort necessary tocompete for an account. Another thing I need is the opportunity towork with competitive markets. Sometimes social-service agencies,when entertaining proposals for their business, allocate markets totheir current broker and an additional one. If I'm not allocatedcompetitive markets, it will be impossible for me to create aproposal with competitive coverages and price.
In my experience, the market for social-service agencies alwaystends to be harder than the insurance market in general. Back inthe 1990s, insureds became accustomed to steadily decreasingpremiums. When the hard market hit, it was really pronounced forsocial-service agencies. Premiums became a significant part oftheir budgets, as well as an important priority for CFOs, whoassumed the lead role in working with insurance brokers. Most havekept it. Today, while it's possible for social-service agencies toobtain lower premiums on renewal, rate reductions are not nearly assteep as they are for some risks.
Indeed, insurance for social-services agencies is unlikely to everbecome a “commodity.” Therefore, the keys to success for brokerslikely will remain in-depth knowledge of the field, a level ofservice that pleases clients and leads to referrals, and excellentrelationships with specialty underwriters.
Or, to put it another way, when I wake up tomorrow morning, I'llstill be glad I'm in this niche. William Dobson issenior vice president in the New York, N.Y. office of RiskStrategies Co. A broker since 1977, Mr. Dobson had previouslyworked for Sedgwick CMS before joining Risk Strategies in 1998. Thecompany, formed by Michael Christian in 1997, has 100 employees insix offices nationally. Headquartered in Boston, Risk Strategieshas an annual premium volume of $275 million, largely in commerciallines.