Hard Market, Valuable Research, Public Perception & Antitrust Litigation Pressure Higher Education World

The U.S. higher education insurance market is as diverse as the academic degrees these institutions offer. But one recent challenge facing the sector is a downturn in public trust that may be contributing to the increased frequency and severity of claims activity, according to Stacie Kroll, managing director, higher education practice, at Gallagher. Aggregate risks such as antitrust litigation have resulted in a crunch on liability capacity. Business interruption coverage and valuable research stored on campus is also a critical exposure today, she says.

In interviews with Insurance Journal’s Allen Laman and Andrea Wells from RIMS’s RiskWorld in Chicago May 4-7, Kroll discusses top concerns facing this dynamic sector that are putting added pressure on higher education facilities nationwide.

Describe what’s happening in the higher ed insurance market today?

Stacie Kroll: There are two things happening at the same time, in parallel: declining public perception of higher education’s value, and a really challenging insurance market. … Notably, we’re seeing rate increases on the liability side of the house. And we’re also seeing a capacity reduction in liability coverage available where current market conditions are resulting in a reduction of limits and a reduction of overall capacity. I think the public’s perception of higher education today, and how it pertains to their insurance portfolio, is definitely leading to an increase in severity and frequency of claims.

That [trend] has to do with higher education being seen as big business rather than as institutions for global socioeconomic good, which is how I think we were seen maybe 10-plus years ago. Now we’re seeing this declining public perception, which is leading to more claims. More people want to hold us accountable, more people see us as having large wallets, as able to pay these large claims. That is absolutely driving an increase in severity and frequency of claims, and it is directly impacting the insurance market.

From a reputational standpoint, the reputational risk really goes to student enrollment. High education is seeing an enrollment decline. There was already a prediction called the enrollment cliff of 2026 we’ve been talking about for 18 years as the birth rate in the U.S. population fell. … Now, that’s combined with a declining public perception of higher education, and folks aren’t seeing the value or are questioning the value of entering higher education. So, institutions are seeing direct financial pressures as a result of the reputational risk they’re dealing with right now.

It seems, at least from news headlines, there has been a recent rise in student protests on college campuses nationwide. Has that led to additional claims activity, as well?

Kroll: We’re definitely concerned about claims but haven’t seen an uptick in claims activity from civil unrest. I’ll say student activism and protests are ingrained in the lifeblood of this industry, so protests on college campuses are common. They happen all the time, and more than not, they happen incident-free. We’ve seen the [media] headlines where these protests have resulted in incidents, whether that’s campus police disrupting the protest, students being detained or expelled, or not receiving their degree … We’ve seen some of that activity. But we haven’t seen a higher volume of claims activity coming out of that.

What trends are driving claims for higher education institutions today?

Kroll: One of the things that we’ve seen [driving claims] is antitrust litigation. We are seeing D&O carriers start to restrict terms and conditions around antitrust because it is seen as an industrywide exposure–one we didn’t see a decade ago. Now, that trend [in litigation] has to do with public perception. It has to do with institutions of higher education now being seen as business … Whereas a decade ago, we were seen as very collaborative, working together for the betterment of the education of society; now, it’s resulting in expensive litigation. … So now, we are seeing carriers look at that [exposure] critically and determining whether they can continue to insure that exposure.

What other risks and exposures do you have your eye on in the higher education world today?

Kroll: Oh my goodness, business interruption and research is so fun right now. We have a number of property carriers that have been insuring business interruption in the research space, and they haven’t quite fully understood what they’re insuring. Research is complex, and it’s difficult to understand the value of what’s in these buildings, the values of what’s stored in freezers–the samples and lifelong research. Some of these samples are 100 years old.

So, when the power goes out and that sample is lost, that’s a high-value claim. Insurers are seeking to better understand [the risks], and risk managers are seeking to educate them.

[Managing the risks] starts with really good loss control. … The second step is valuing that research. That has to do with grants tied to that research, so it’s future money for the institution. … You have to evaluate that [exposure] and account for the potential loss in income. And [institutions] are also undergoing mapping exercises to identify where that concentration of high-value research is and making sure that there’s some separation of risk across the campus.

We’re starting to see some really cool mapping of where these values are by building, where these values are by research arm, and starting to bring our insurance partners along in that mapping. … So, if we lose a building–let’s say it burns to the ground–we’re not losing a critical mass of research. We have another backup in other places on campus.

We’re starting to evaluate the segregation of that risk, mapping it out across the campus, ensuring that backup power and business continuity plans are in place. And then accounting for what would be the financial loss if this piece of research is actually lost. What would that disruption look like? Then accounting for that in their property policies.

Any last recommendations on how best to address risks in higher ed this year?

Kroll: There’s a great opportunity for risk managers to embed themselves in strategic decision-making, enterprise risk management, and apply an ERM framework to some of the external factors that are happening to the industry with reputational risk, a challenged insurance market, a decline in federal funding, and a decline in student enrollment, all of this. Applying an enterprise risk management framework is critically important and helps guide senior leadership through these challenges with a sense of confidence.

There’s never been a better time for risk management to step in and say, ‘Hey, we’ve got the business processes, we’ve got the skills, and we’ve got the acumen to add value.’

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