Understanding the opportunities and needs of the nonprofit insurance marketPamela Davis, founder, president and CEO of the Nonprofit Insurance Alliance Group talks to MissionBox about the unique needs of the nonprofit insurance market. Here, MissionBox co-founder and CEO Kathryn Engelhardt-Cronk talks with Pamela about her groundbreaking work in the nonprofit and insurance sectors.
Tell me a little bit about what made you interested in nonprofit insurance and why you decided to dive into this industry.
Since I was not able to complete my college degree right out of high school, I returned to school in my thirties in California. After getting my BA at UC Santa Cruz, I went on to get my Masters in Public Policy at UC Berkeley. I wrote my graduate thesis on the difficulties nonprofits have finding affordable liability insurance.
I proposed in my thesis that 501(c)(3) nonprofits could do a better job by creating insurance cooperatives themselves, rather than relying on the inconsistent willingness of commercial insurance companies to provide liability coverage to them. Starting and growing a group of insurance cooperatives, themselves 501(c)(3) nonprofits, was the focus of my career for the next 30 years.
How large has the group grown since it was founded?The Group writes about $130 million in premium, has $200 million in surplus and about $500 million in assets, so we are considered a mid-size insurance carrier. We insure about 17,000 members, all 501(c)(3) nonprofits in 32 states and the District of Columbia.
How is it being a woman in the insurance industry?
After realizing that I was the only woman in the room much of the time, I started asking around trying to meet other women who have created insurance companies. Well, it’s been many years since I first asked and I have yet to speak with anyone who knows of another woman who has started an insurance company. It appears I may be the only one.
Beyond that, female CEOs of insurance companies are few and far between, probably five percent or less. Everyone keeps saying that it is only a matter of time until there is parity in this industry, but I haven’t seen much progress in the most senior levels of leadership over the past 30 years. I think that the insurance industry is missing a lot of talent because of this. The entire C-suite in our Group is women and we have a very balanced senior leadership team. I tell anyone who asks, that my secret is hiring and promoting the most qualified. It's pretty simple.
The Nonprofits Insurance Alliance Group is a 501(c)(3) organization. In what way does that help you develop new products and support for nonprofits?
Our mission is to protect other nonprofits. That means more than just being there for them when something goes wrong. We focus our insurance policy language on covering the sorts of things that are likely to happen at a nonprofit. We also have a claims philosophy of trying to find coverage under the policy, rather than trying to find a way to get out of the claim.
Our mission also includes creating resources to help nonprofits avoid injuries and accidents. Our Loss Control Department provides access for our members to a vast array of written materials, videos, and webinars on topics of particular interest to nonprofits. We also have three Employment Risk Managers whose full-time role is to provide free advice and guidance to members on questions they have about situations involving their employees. We also offer free, unlimited, online driver training across the country.
You created an entirely new way of delivering insurance specifically to nonprofits. In what other ways has your company made an impact on the insurance industry?
When I started the first company in California, no insurance company offered a sexual abuse policy. It was provided on what’s called a ‘silent’ basis on the general liability policy. That meant the insurance company had a lot of latitude after the claim was made to determine whether there’s going to be coverage or not. So nonprofits were very insecure in their positions as to whether they were covered.
We started by offering a policy with clear language on what would be covered and under what circumstances. At first, we offered relatively low limits because we didn’t really know whether this would succeed. Now, every insurance company that has policies for nonprofits — there are about a dozen across the country — offers some sort of sexual abuse policy. You really can’t be in this market and not offer sexual abuse to nonprofits anymore.
Our experience has also demonstrated that nonprofits are not the poor, high risk clients portrayed by the commercial insurance industry in the mid-1980s when the crisis was at its peak. In fact, when we first started pricing nonprofit’s insurance in the late 1980s, we typically gave a credit of about 25 percent off the insurance industry recommended rates for the basic coverage. Now, 30 years later, we use those same rates credited by 50 percent, with no increases for inflation.
What is your biggest barrier to finding new nonprofits? Is it just that they don’t understand?We let nonprofits know about the Nonprofits Insurance Alliance Group through our website, and through social media and even old-fashioned snail mail, but the way most nonprofits find us is through independent, mostly small and mid-sized, local insurance agents and brokers. We work with a variety of terrific agents and brokers, many of whom also have a heart for working with nonprofits. An impediment for us is sometimes the amount of commission we pay to brokers and agents. Many large brokers do not want to work with very small nonprofits and/or they receive higher commissions or contingent commissions from commercial carriers, which means they are less likely to introduce nonprofits to us.
Where do you think the nonprofit insurance infrastructure support industry is going to be in the next five years?
One source of frustration for me is that we are still seen mostly as an “insurance company.” We see ourselves much more as an infrastructure support organization that charges fees for something that a nonprofit has to purchase — insurance — and along with that insurance, offers a lot of training and educational benefits that both help keep claims to a minimum and make the job of running a nonprofit just a little bit easier.
I would like to see a similar organization created to provide cash flow loans to nonprofits. I truly believe this could scale very quickly to become self-sustaining and in the process offer a lot of training and tools to nonprofits around financial literacy. We have a small loan fund for our members and have lent out about $3 million in $50,000 one-year loans over the past couple of years with great success. Another nonprofit I helped start, American Nonprofits, is trying to leverage and expand this concept.
While I think there should be foundation funding for infrastructure support, I suspect that grants and donations are never going to provide sufficient support to allow most of these organizations, such as state associations, to get to a sustainable scale. In the future, I believe that to be really successful in the long-term, and really make an impact on our sector, infrastructure organizations will need to provide an essential product or service to nonprofits, such as insurance or lending, and offer the training and infrastructure support as secondary products.
What else would you like our readers to know about you or nonprofit insurance?
Liability insurance is often treated as a necessary evil and a commodity purchase. With budgets tight, many nonprofits look only for the cheapest possible price without regard for the reputation of the insurance company for actually paying claims. But, when you think about it, the willingness of the insurance company to back you up when you get into trouble is, by far, the most important part of what you purchase.
We have a philosophy of actually trying to figure out how we can pay a claim within the state policy language. That is contrary to what many, if not most companies do, which is only cover specifically what is stated. That distinction can make the difference between your nonprofit staying in business or going bankrupt. It's important to have trust in your insurance company and to understand their reputation for actually paying claims when the chips are down. But it is very hard to put a price on trust.
Finally, I would want your readers to know that I think I have the best job in the world. I thank my lucky stars that I saw a need and had the persistence to stick with what I was sure would be a successful solution, despite dozens of cliffhangers and more naysayers than I can count. It is a real honor to provide this service to other nonprofits.
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In 1989, armed with research for her Master's thesis on the lack of understanding of insurance needs by the traditional insurance industry, Pamela created the Nonprofits Insurance Alliance of California, which grew to be the company it is today. The Nonprofit Alliance Insurance Group is an insurance cooperative composed of four distinct 501(c)(3) nonprofit organizations that provide liability and property insurance exclusively to other nonprofits. The group is rated A (Excellent) VIII by A.M. Best.