The rewards of insuring social service

An agency that has a niche in insurance for social-service agencies is doing more than operating a profit center. By arranging insurance and risk management services for such organizations, an agency directly supports their efforts to make a difference to the lives of the disadvantaged in their communities.

Obviously, agents and brokers interested in this market need to research it like any other. To obtain an overview, we recently spoke with Monica Clark, CIC, AU, vice president of Social Service and Healthcare, at Thomco, a program manager active in this market. Following are edited excerpts of our conversation.
AA&B: How would you classify social-service risks?
Clark: There are hundreds of types. They vary from community action agencies to Head Start to counseling centers. Most are nonprofit, and they help troubled or less-fortunate people in one way or another. They can focus on children, families or on the elderly.
Many provide counseling. They also provide or prepare food, or weatherize homes. They help people fill out job applications, provide job training, teach parenting skills or operate shelters.
AA&B: How many social-service agencies are there?
Clark: I don't have precise data on that, but the niche is huge and definitely is growing.
AA&B: What size do these organizations tend to be?
Clark: They range all over the board. We have accounts paying a $5,000 minimum premium and accounts that go over $500,000. They can have a couple of employees or hundreds.
AA&B: For prospecting purposes, where can agents and brokers find lists of these organizations?
Clark: The majority of social-service agencies get some type of government funding. That's pretty much a common denominator. So I would recommend checking government-funding reports. You can go to government Web sites at the state, county and municipal levels to see the types of social services these public entities support. You can search for information on community-based organizations, as social-service agencies are commonly called. You also can visit sites of well-known charitable organizations, like Goodwill Industries.
AA&B: What about organizations that are affiliated with churches?
Clark: Social-service agencies that are separate entities are good prospects, but those social-service programs owned and operated by churches themselves should be covered under the churches' insurance programs.
AA&B: How should agents approach these prospects?
Clark: Agents can establish relationships with board members–often local business leaders–and learn who makes the insurance-buying decision that way. Doing volunteer work for a social-service agency is another way to learn about its scope and who is responsible for insurance.
A lot of these accounts make their decisions around certain times of year, when they get their funding. So if you write social-service business, January, April, July and October are always the months with a lot of activity.
The accounts are very budget-conscious, so that's something to keep in mind. And they can be political.
AA&B: What are the implications of "very budget-conscious"? Does that mean coverage largely has to be sold on price, rather than meeting a need?
Clark: No, but price is certainly something that they consider. They do value proper coverage, but huge fluctuations in premiums are difficult for nonprofit organizations to tolerate. If premiums increase by more than 5% to 10%, the board is going to ask the agent to market it elsewhere. Typically they ask agents to put their programs out to bid every three years, regardless.
AA&B: What should an agent look for when qualifying accounts?
Clark: You want to look at the loss history, of course. Also, an agency that begins new programs every year without really developing expertise in them concerns underwriters. That comes across as signing up for a new program just to get new funding.
AA&B: Any other red flags?
Clark: A lot of these agencies provide transportation services–it can even be public transportation–so when we're underwriting an account, we make sure they have the right hiring criteria. Driver screening and training are important.
AA&B: What information is needed for submissions?
Clark: Most carriers require supplemental applications in addition to ACORD forms. We ask for brochures to be submitted. Web sites and the financials really provide a lot of information.
AA&B: Financial statements are typically required?
Clark: On larger accounts, definitely. The type of funding they're getting should be indicative of the type of services they're providing.
AA&B: Do the people who work for social-service agencies need to have certain credentials or licenses?
Clark: It depends on the services they provide. If they're doing counseling, they should have credentialed social workers, etc. Many of them operate with volunteers, in which case you want to make sure they receive proper training. If they offer professional services, then you certainly need credentials for the people who deliver them.
AA&B: What kind of professional services might they offer?
Clark: They may have professional liability exposures when providing counseling or education services, or operating sheltered workshops. If they offer health screening, we'd want to make sure they have licensed nurses.
AA&B: Are policies and procedures manuals needed for underwriting or risk management?
Clark: Social-service agencies do have manuals. We don't necessarily ask for copies, but we make sure they have them. Regarding risk management, that's where an agent really has an opportunity to shine. We do a lot of business with an agency in Mississippi that has been successful by helping agencies with driver screening and training, and making sure they do regular MVR checks.
AA&B: Is that the main focus of risk management–the commercial auto exposure?
Clark: It is one of the first areas that can be addressed. Sometimes these accounts run with pretty thin budgets, so you want to make sure they have proper safety training and vehicle maintenance. They tend to have older buildings and vehicles, so underwriters want to make sure they do regular maintenance on them.
AA&B: What information do underwriters require about property exposures?
Clark: Obviously, it's important to know the age of the building a social service agency occupies. If the building is older, you want to make sure it has been properly updated and has appropriate protective devices–especially if you have a residential exposure.
AA&B: How would you characterize the market for social-service agencies?
Clark: It's not as soft as some niches. I would say that we've seen modest rate decreases, about 10%, except for harder-to-place accounts, such as battered women's shelters, camps for the developmentally disabled, camps that have rope courses, camps for adjudicated youth, etc.
AA&B: What other major exposures do they have?
Clark: An agent can get his foot in the door by being able to offer health benefits. They need to be able to offer D&O coverage–although we don't provide that in our program–and workers compensation.
AA&B: Do these accounts make much use of deductibles or self-insured retentions?
Clark: Not usually. We would only see minimal deductibles on property and auto, but generally not on the liability.
AA&B: What features should a good program for social-service agencies provide?
Clark: For most social-service agencies, you can still get occurrence-based coverage on professional liability as well as general liability. Coverage is available on admitted paper. The auto coverage should include hired and nonowned auto, because you often have that exposure. Abuse coverage should be provided in the general/professional liability form. Make sure volunteers are covered. Check for exclusions applicable to special events or sports activities. Many social-service agencies hold special events to raise money, or work with developmentally disabled clients on sports programs like Special Olympics.
AA&B: Is coverage always available on an admitted basis?
Clark: For some harder-to-place accounts, like those serving troubled youth or operating shelters, agents may have to turn to the E&S market.
AA&B: Where do most of the claims come from in this niche?
Clark: We've seen them mostly in the auto coverage. Some agencies operate vans that hold 15 or more passengers. An incident involving such a van can lead to a serious claim. If you have residential exposures, you have a potential for claim severity.
AA&B: What risk management procedures do insurance companies require social-service agencies to have?
Clark: None other than those we've talked about. On the professional side, one thing we look for is a protocol for reporting incidents within the organization, and then an action plan for preventing them from recurring.
AA&B: What resources or backgrounds do agents and brokers need to develop a specialty in this niche?
Clark: There's a multitude of activities and services that social-service agencies provide. So agents who want to specialize in this niche need to understand each exposure that's out there. Every account is going to be different.