Organisations responsible for the welfare of children should consider using captive insurance to mitigate the impact of rising insurance costs, according to Mark Renske, a client executive at Hylant.
All companies have had to contend with rate increases for general and professional liability coverage in recent months. Even companies with better-than-average claims experience have seen rates jump between 4 percent and 15 percent, noted Renske. For those with a poor claims history or substandard risk controls the rise can be up to 30 percent.
Meanwhile, companies involved in looking after children have the added issue of increased accusations of negligence related to sexual abuse. Such accusations have resulted in legal actions and large settlements, further increasing the cost of insurance, Renske said.
“Social inflation occurs when social media and news coverage drive demands that organisations deemed to be responsible compensate the victims,” explained Renske. “State legislators react to that public outcry by changing laws in an effort to protect victims, such as extending or eliminating traditional statutes of limitation. Liability attorneys find ways to bring cases to friendly courts in communities where juries tend to be generous.”
This has encouraged some carriers to stop providing liability coverage to specific categories of organisations, said Renske, while others reduce the limits of coverage and use policy language to carve out specific types of risks.
“An organisation may be doing everything right and providing an excellent level of protection, but they’re paying a costly penalty for the mistakes others have made,” Renske said.
Renske argued a captive can help companies struggling with rising insurance costs. “Members agree to follow common rules and standards to minimise the potential for claims,” Renske said. “They may set a limit for claims payments and purchase stop-loss policies to cover larger claims.”
Renske also advised companies involved in childcare to review their policies and practices to minimise their exposure, ensuring they have strong legal relationships in place before any issues arise. “It’s also wise to become aligned with state and national advocacy groups,” Renske added.
Hylant, Mark Renske