Insight: Private Lessons
Economic challenges drive the need for risk management in private education.
The insurance needs of today's private schools, colleges and universities are inherently complex, due in part to risks associated with the young populations they serve. As schools broaden their offerings and reduce expenses, agents and insurers with an understanding of this market play a critical role in ensuring their clients have the proper protection in place.
With the recent economic crisis taking its toll on endowments and planned gifts, private schools are increasingly focused on maximizing tuition dollars while minimizing expenses. This need to be aggressive on two fronts--proactively pursuing new students while working within tighter budget constraints--is creating additional areas of exposure for private education clients.
The good news is that families continue to invest in private education, despite strains on household incomes. The year 2009 was a challenging recruitment period for many schools, but nearly three in four private colleges and universities either met or exceeded their enrollment expectations, according to a Maguire Associates survey of 380 senior admission officers. This came as tuition increased 4.4% to an average cost of $26,273 per year, according to the College Board. The U.S. Department of Education estimates that at the K-12 level, 11% of all U.S. students are enrolled in private schools.
Schools are working harder to compete for tuition with enhanced offerings that appeal to prospective students and parents. With an evergrowing number of social and recreational activities such as rock climbing and horseback riding to complement traditional academic coursework, campuses are becoming more like "educational resorts."
Schools are also providing a broad range of experiential learning opportunities, from local internships to international sightseeing or cultural immersion trips. As students become increasingly interested in global environmental and humanitarian issues, schools are responding with opportunities such as working on community rebuilding projects or spending spring break in a Costa Rican rain forest.
When assessing private education risks, underwriters need to consider student and faculty participation in higher hazard physical activities and international travel that may be offered as part of a school's recreational or community service programs. Transporting students to and from athletic events or volunteer projects is another area of exposure, whether it involves charter bus, school-owned or personal vehicles.
Administrators are also responding to budget constraints by identifying ways to operate more efficiently without compromising quality or reputation. They're looking at current degree programs to determine where they need to expand offerings to meet the demands of today's students as well as eliminate programs with low student interest.
Discontinuing existing programs can lead to professional or employment practices liability claims. For example, a school that eliminates a course of study could face allegations that it failed to deliver services as expected if current students are no longer able to complete their degree requirements. If a program is staffed by tenured faculty, there may be contractual obligations. Reassignment to comparable positions may be challenging, particularly if professors are highly specialized. As private schools become more aggressive in attracting students and managing costs, agents and insurers play a key role in helping administrators navigate new areas of risk.
(Jonathan Bennett, a Best's Review contributor, is executive vice president for personal and small business insurance at The Hartford Financial Services Group Inc. He can be reached at jonathan.bennett@thehartford.com.)
