If you are tempted to move to a commercial carrier for what seems like a good deal this year, there are some things we hope you consider:
- Is the commercial insurer in this for the long haul with you?
- Will they drop you after you make a claim?
- Will they do a bait-and-switch with your premium after one year?
Consider these questions carefully. If you leave Nonprofits Insurance Alliance (NIA) this year and are subsequently nonrenewed by a new insurance carrier, we may not be in a position to take you back when you need coverage. (This especially applies with larger accounts.)
NIA has continued to insure nonprofits while many commercial insurers have abandoned the nonprofit sector over the past few years. When commercial carriers were executing mass nonrenewals of all things nonprofit due to perceived risk, NIA took the time to examine nonprofit data carefully — to determine which nonprofits presented an impermissible and recurring risk, and which were insurable.
In short, NIA worked hard to support as many of our members as possible in a truly crazy environment — where judges and juries seem to make no distinction between nonprofits who are doing everything right and those who have caused injuries.
We know that just because you haven’t had a claim recently, that doesn’t mean you won’t be the next to be targeted. We also know that if you have had a claim, that doesn’t necessarily make you a poor risk.
Because NIA insurers are 501(c)(3) nonprofits, our mission is to create the stability nonprofits need. Just like other nonprofits, when there is a community need, NIA stays and fights to meet the need rather than abandon our sector when they need us the most. That is why NIA consistently renews 94% of our members year in and year out. But, to do this, we need members to extend that same loyalty to us.
We recognize NIA rates have increased this year and our ability to offer higher limits has decreased. We have done the work to make sure that our rates reflect the new reality in the judicial landscape.
We need to stand together. We hope you will consider the value of doing that — now and in the future.
If you want more information, we have provided an explanation below for why prices have increased to enable us to be here for you for decades to come — no matter how fickle the commercial market may get.
Why are insurance costs so high?
I founded the NIA companies so that nonprofits could have affordable and stable insurance. Despite our best efforts, that has been incredibly difficult to achieve these past few years.
Why are insurance costs so high and insurers appetite for high limits so low? The short answer is: financial inflation, climate change, and social inflation.
But let’s dig a little deeper.
Financial inflation
By financial inflation, I mean that it is just more expensive than it used to be to heal bodies and fix things like vehicles and buildings. Everything costs more than it did a few years ago, with multiple industries bracing for even more supply chain shortages.
These factors are primarily increasing the costs of general liability, auto liability, auto physical damage, and property insurance.
Climate change
A significant factor increasing the frequency of property insurance claims — and the cost of insurance — is the heating climate, causing more wildfires and more intense storms.
Social inflation
Social inflation refers to the more recent inclination of judges and juries to award many millions of dollars to injured parties without regard to whether the nonprofit defendant in the case was the cause of the injury.
Because people are angry about the cover-ups of abuse at large institutions, community-based nonprofits are being unfairly painted with that same brush — even when they did nothing to cause the injury. This is driving significant increases in improper sexual conduct and physical abuse liability claims.
What do premiums support?
For NIA members, insurance rates are driven exclusively by the experience we have from handling about 8,000 claims each year against nonprofits. As 501(c)(3) nonprofits, we don’t have shareholders and none of our staff or management, including our founder, gets financial benefit other than salary compensation. Our board members serve as uncompensated volunteers.
We are continually looking for ways to streamline operations and become more efficient, but certain expenses are immutable.
Our premiums must cover the cost to handle, defend, and pay those claims, as well as the costs of all the other parts of operating NIA, including significant technology expenses. And, as insurers that must maintain certain financial leverage ratios as they grow, we need to accumulate sufficient net income to hold the equity required to support annual growth.
Why rate increases now?
We have done our best to stairstep rate increases to minimize the shock on your annual budget. But, because of a necessary technology conversion and a few other factors, we were unable to apply the full increases in rates we needed in 2024 for certain types of coverage — particularly auto physical damage and certain property coverage.
So, while the increases seem high in 2025, it is because this year you may be experiencing the increases we were not able to put through in 2024 — as well as the required increases in 2025. You saved money in 2024, but we realize that doesn’t do anything to help with your 2025 budget.
When does this all end?
While we can’t predict the future, based on available information, we are very hopeful that these rate increases can now begin to level off — at least for the liability coverages.
We won’t be able to control things like unexpected inflation or continuing unfavorable changes to the judicial climate, but we have taken every precaution at our disposal to try to bring this monster to heel through our rates, forms, and limits offered.
With property insurance, we have made some difficult decisions to focus on the 90% of risks we can reasonably take without exposing the entire pool to catastrophic losses.
Our goal is to provide our members with the long-term protection they need without placing a target on them — or the nonprofit sector in general. That’s why we’ve done our best to reduce policies with rich benefits and high limits — because those are the policies that act like catnip to opportunistic plaintiff attorneys on the prowl for the biggest jackpot they can find.
In our experience, plaintiff attorneys advise their clients to take whatever the limit is on a significant claim, rather than doing the work to try to claw back any other funds from a nonprofit’s assets.
NIA is with you for the long haul.
We take our role seriously to bring as much stability and affordability as possible to this volatile insurance market. It is not easy, nor will we be able to do it without disappointing some of you. For that we are sorry. But please know that, in our case, we are making these decisions in the best interests of the long-term health of nonprofits and the communities they serve.
We don’t have divided loyalties between you, our members, and profit-seeking shareholders. Our allegiance is to you and the continuing strength of our nonprofit members. We hope that you see the benefits of sticking together for a stronger nonprofit sector.
