Transcript Illinois Association School Business Officials

Risk Management 101
Presented at:
Illinois ASBO 61st Annual Conference
May 16, 2012
Presented by:
Michael McHugh
Area Executive Vice President
Arthur J. Gallagher Risk Management Services, Inc.
Introductions
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31+ Years Insurance and
Brokerage Experience
National Pooling Niche
Principal
National K-12 PrincipalArthur J. Gallagher Public
Entity & Scholastic Division
ASBO International
Member
Illinois ASBO Member for
25 years
Experience working with
over 575 districts on
various risk & insurance
topics
Objectives
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2.
Define Risk Management
Explore basic components of a typical
Risk Management Program
Risk Management Defined
Risk Management covers all the processes
involved in identifying, assessing and
judging risks, assigning ownership, taking
actions to mitigate or anticipate them, and
monitoring and reviewing progress.
Risk Management Defined
Planning for the negative consequences
of any decision process or action by
using whatever means feasible to control
the chance of financial loss.
Public Sector Risk Management Manual
Risk Management Involves
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Trying to stop losses from happening
(through avoidance, risk control, loss
control or loss prevention)
Paying for the losses that do occur
(through reduction, insurance or risk
transfer)
Risk Categories
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Strategic Risk – strategic objectives and
political, economic and global market conditions
Financial Risk – currencies, interest rates, credit
and liquidity risks
Operational Risk – risks related to systems,
processes, technology and people
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Compliance Risk – regulatory and legal
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Reputational Risk – damage to “brand”
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Hazard Risk – property, liability, workers comp
Risks for Public Schools
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School Districts = “Institutions of Learning”
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Education of Students
Athletics & Extracurricular Activities
Employees & Volunteers
Transportation
Food Service/Cafeteria
PTO/PTA/Booster Clubs
Buildings/Contents including Materials and Mobile
Equipment
Playgrounds and Athletic Facilities
Educational Foundations
The Evolution of Risk Management
From PRIMA
1978
•Insurance
Procurement
•Policy
Administration
2008
1998
•Risk Financing
•Cost Allocation
1988
•Loss Control
•Risk Financing
•Contractual Risk
Transfer
•Loss Control
•Claims/Litigation
•Organizational RM
Management
Focus
•Claims Management •Outcome
Orientation &
•Regulatory
Benchmarking
Compliance
•Integrated
•Public Safety RM
Disability
•Employee Benefits
Management
•Chief Risk Officer
•Enterprise Risk
Management
•Consultancy
•Risk Financing
•Multi-Jurisdictional
Integration
•Loss Control
•Claims/Litigation
Management
•Cost Allocation
•Bus./Government
Partnerships
Risk Management Toolkit
Avoid
Subcontract
Exit
People
Control
Plant
Risk
Finance
Fund
Insurance
Transfer
Contract
STANDARD PUBLIC SCHOOL
INSURANCE COVERAGES
Insurance
A contractual relationship that exists when
one party (the insurer) for a consideration
(premium) agrees to reimburse another party
(the insured) for loss to a specified subject
(the risk) caused by designated contingencies
(hazards or perils).
Insurance Program Coverages
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Definition of Insured
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Needs to be broad so that it covers
the following:
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District and its employees / student teachers
Elected / appointed officials
Sponsored / endorsed organizations
Volunteers who do work at your
direction on behalf of the District
Property Coverage
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Buildings
Contents
Inland Marine
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EDP Equipment
EDP Extra Expense
EDP Media
AV Equipment
Valuable Papers
Fine Arts
Musical Instruments
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Builder’s Risk
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Needed for new
construction
and renovations at
your district
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Extra Expense
Increased Cost of
Construction /
Demolition Coverage
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Auto Physical Damage
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Crime Coverage
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Employee Dishonesty
Loss of Money - inside / outside premises
Depositor’s Forgery
Bonds
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i.e. working cash / treasurer’s / life safety
Boiler and Machinery Coverage
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Fired / Unfired Pressure Vessels
MEA coverage
Refrigeration coverage
Air Conditioning Units
Extra Expense
Water Damage
Joint Loss Endorsement
Automobile Coverage
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Coverage for autos, trucks, bus fleet
Auto Liability
Auto Physical Damage
Hired / Non-owned Coverage
General Liability Coverage
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Limits usually $1M
per occurrence /
$3M aggregate
Fire Damage (Legal
Liability) $500K limit
Employee Benefits
Liability - $1M
Claims-Made
coverage
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Broad form General
Liability coverage
form, which includes:
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Bodily Injury /
Property Damage
Personal Injury and
Contractual coverage
Sexual Abuse /
Misconduct coverage
Athletic Participation
coverage
School Board Liability Coverage
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This is you, your boss,
and your Board
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Make sure it covers:
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Get a broad definition
of named insured
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Can be written on an
“occurrence” basis
or on a “Claims-Made”
basis
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Employment Practices Liability –
failure to employ/promote
Discrimination
Harassment
Wrongful Termination / Discipline
IDEA coverage
Back Wages coverage
Non-Monetary coverage
Failure to grant tenure
Retaliation (Including Lockouts)
Wrongful demotion or negligent
employee evaluation
Workers’ Compensation
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Medical
Indemnity
Statutory
Employers Liability
Other States Endorsement
Voluntary Compensation Endorsement
Student Accident Program
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Provides $5M of coverage
for ALL students in the
district for ALL school
sponsored and school
supervised activities
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Covers 100% of any out
of pocket cost incurred by
parent/guardian for
medical expenses
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In case of no primary
medical insurance,
becomes primary medical
insurance for injured
student
Provides option for 24hour coverage to be
purchased by
parent/guardian
Reduces General Liability
Premiums
Student Accident Insurance
Benefits
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Reduces litigation against district
Reduces administrative burden on district
administration
Good-Will gesture towards community
Reduces claim costs
Easy for parents to get reimbursed
Specialty Coverages
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Pollution Liability
Foreign Liability
Special Events
Professional Liability
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Nurses
Educational Foundations
Fiduciary Liability – including 403(b) exposure
Educational Foundation Directors’ &
Officers’ Liability Coverage
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Separate Board of Directors creates
exposure
Provides up to $5M for fiduciary liability
arising out of funds managed by
Foundation
Foreign Liability Program
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Covers liability arising from trips overseas
Provides coverage in case of bodily injury
or property damage to a third party while
traveling abroad
VERY INEXPENSIVE COVERAGE
Pros and Cons of Available Options
Less Control
Less Risk
First
Dollar
Insurance
Program
Safety
Dividend
Program
Greater Control
Greater Risk
Large
Deductible
Retro-Plan
All Lines
Aggregate
Stop Loss
Specific
Excess
Insurance
Placements
by Line
Rent-aCaptive
Captive or
Risk
Purchasing
Group
Pure SelfInsurance
Pros and Cons of Available Options
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Stand Alone / Individual District Purchase
Cooperative Purchasing
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Pools
Risk Retention Groups
Captives
Pros and Cons of Available Options
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Cooperative Purchasing
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Mission
Eligible Members
Size
Lines of Coverage
Program Structure
Financial Condition
Accessibility
Governing Body
Know the
Group’s
Mindset!!!
Cooperative Purchasing
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Loss Control Activities
Vendor Capabilities and Resources
Claim Settlement Policy
Member Requirements
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Financial
Contractual
CONCLUSION
Contact Information
Michael McHugh -
Area Executive Vice President
Public Entity & Scholastic Division
Arthur J. Gallagher Risk Management Services
Direct: (630) 285-4373
Email: [email protected]
QUESTIONS?