CCVO Op-Ed: Charities Also Suffer When Premiums Go Up

Charities Also Suffer When Premiums Go Up

Calgary Herald March 21, 2005

When the insurance industry recently released its earnings report announcing a profit of  $4.2 billion last year, criticism focused on the high auto insurance premiums some drivers have been facing.

This focus ignored another part of our society that has also been affected by increasing rates: non-profits and charities.

Rising insurance rates are affecting organizations in Calgary and across Canada. Many non-profit organizations and charities have seen their rates dramatically increase over the past few years, some in excess of 300 per cent.

This rise in premiums, in the vast majority of cases, has nothing to do with a rise in claims. Organizations have had to absorb this unanticipated rise in operating costs. Unfortunately, most groups have little capacity to raise more funds to compensate for the rising costs. When costs go up, services disappear and that affects everyone in Calgary. Nonprofits and charities, in contrast to businesses, have limited ability to pass an increase in costs on to those who use their services. In addition, few donors want to pay the insurance bill for an organization. They want to see their money go to helping the community in a more direct and visible way.

The result is that organizations are faced with tough choices: where can they make cuts to pay the insurance bill? Cut programs that serve the community? Change what they do to match the coverage they can afford? Eliminate employees? Stop maintenance on their space and equipment?

All of these options have negative effects on the organizations’ ability to serve their clients and the community. It means that summer camps for children could be cancelled because there isn’t enough staff to properly supervise them. Recreation organizations may not be able to take people to Banff anymore, because the activities are deemed to be too high-risk. Vulnerable communities could be left without support because an organization can’t find ways to cover costs.

Groups who have seen their premiums rise have heard a variety of reasons for the increases: it’s a “hard market,” “September 11th has made everything riskier to insure,” “the costs for the industry as a whole are much higher.”

When profits are going up in the area of 70 per cent and the return on equity that the insurance industry is getting is 20 per cent, it is time to question the validity of reasons given by the insurance industry.

- Katherine van Kooy
President and CEO, Calgary Chamber of Voluntary Organizations