Nonprofits’ Insurance Alliance of California Celebrates 15 Years

Nonprofits’ Insurance Alliance of California (NIAC), a nonprofit, charitable risk pool specializing in 501(c)(3) nonprofit organizations, recently celebrated its 15th anniversary. NIAC, based in Santa Cruz, Calif., offers liability insurance to nonprofit entities of all sizes and estimates that it has saved its members about $40 million over the past 15 years.

Pamela Davis, founder, president and CEO of NIAC, said that there are several things that make NIAC unique.

“In the mechanics of what we do, we look like an insurance company, but our motivations and some of the things that guide what we do are somewhat different,” she said. “Any net income that we generate is for the benefit of the charitable sector. There’s no way for any individuals to benefit. If we have better claims results, that benefit all goes back to the nonprofits that we insure. We actually use it to grow the company so we can provide service to more nonprofits.”

Davis said that NIAC’s mission is to serve the whole range of nonprofits, unlike some insurers that may target large organizations.

“We are very happy to serve the very smallest of the nonprofits,” she said.

NIAC offers all types of liability insurance coverage, including auto and general liability, but also offers specialized coverages for directors and officers, sexual abuse and social service professionals. NIAC works with independent agents and brokers and pays commission and wrote approximately $43 million in premium for 2004.

Davis was a student at UC Berkeley’s Goldman School of Public Policy when she came up with the idea for NIAC. The idea was an outgrowth of her graduate thesis.

“The main idea was that it was the last hard market of the mid-1980s and insurance companies were not offering coverage to nonprofits,” she explained. “A lot of them weren’t writing it at all. Nonprofits were actually not able to continue operations because if they couldn’t get proof of insurance, they weren’t able to get funding. This didn’t seem quite right: insurance underwriters were making decisions that were keeping social services from being offered in California. I suggested that nonprofits should try taking on the risk themselves.”

NIAC, established in 1989, was funded by a group of six foundations that made low-interest loans of $1.3 million. The organization paid back the loan in full and formed an affiliate reinsurance captive company, Alliance of Nonprofits for Insurance, Risk Retention Group (ANI-RRG). ANI-RRG writes in Colorado, Connecticut, Delaware, District of Columbia, Iowa, Kansas, Maryland, Michigan, Missouri, Nebraska, Nevada, North Carolina, Ohio, Oregon, Pennsylvania, Utah, Vermont, Virginia and Washington. The affiliate company was formed about three years ago.

Davis said that NIAC has had an impact on the industry. She said that many of NIAC’s brokers like the organization’s focus on service and wish that other insurance companies could provide similar service to smaller nonprofits.

“We have really tried to give top-notch service to nonprofits and their brokers that in some cases you don’t really get if you’re a really small account,” she said. “Hopefully we’ve at least started to raise the bar a little bit on the types of coverage and service that nonprofit organizations get from the insurance industry generally.”

Davis said that NIAC has had an even bigger impact on the nonprofit sector, giving its members some financial stability. She said that NIAC members can depend on consistent pricing and coverage availability. “Maybe we can say that we’ve removed one of the many worries that nonprofits have in their operations,” she said. We’ve helped them to at least not have to worry about continuing affordable liability coverage.”

Although Davis conceded that NIAC’s financial impact on nonprofits is difficult to determine, NIAC estimated that it had saved the nonprofit sector in California about $40 million over the past 15 years. She said that NIAC once determined that it had excess in prior years and members were paid back $1 million.

“If our stability is encouraging other carriers to look more carefully at their rating and keep their prices more stable, then we’re having an even bigger impact to provide more stability overall for this service for nonprofits,” she said. “Maybe we’ve gotten the nonprofit sector a little more respect from others in the insurance industry. They notice it now and I think they take it more seriously.”