RISK & INSURANCE®
POWER BROKER®: HIGHER EDUCATION
2012
Joseph Cafferelli
Teresa Koster
Managing Director Aon, Phoenix More Coverage, Less Money A large Arizona-based private education provider with schools in 39 states as well as an online university faced a very difficult renewal last year because of ongoing shareholder litigation and the stiff regulations governing its industry. A class action lawsuit against the company had been generated
years earlier, alleging that its then-management team knowingly misled the market with its
forecasts. The case went all the way to the U.S. Supreme Court, which sent it back to a lower
court for adjudication.
“The for-profit education industry historically is a lightning rod for shareholder suits,” the
company’s vice president and treasurer said.
“There’s a lot of money involved and stock prices are volatile,” he added. Given all that, he
praised for the way Aon Risk Solutions Managing Director Joseph Cafferelli guided his company
in its insurance program.
“Joe was effective in guiding us through our renewal while all that was going on. He got us in
front of the right carriers so we could tell our story in person.”
Cafferelli produced seven-figure savings for the education company—a 33-percent reduction
in premium spending—while increasing coverage.
“I’ve dealt with a lot of brokers,” the company VP said. “They were all good. Joe is the only
one I would say is exceptional. Why? Because you don’t know until you have serious risk needs
just how important your broker is.”
Anne Mulholland
Director, Casualty Brokerage Aon, Chicago A Mixed Bag of Risk Issues The board members of colleges and independent schools in a 14-school insurance buying group in Florida were concerned about inadequate limits for sexual misconduct liability. The primary carrier could not go any higher than $5 million, but buying adequate coverage on a stand-alone basis was prohibitively expensive.
The executive director/risk manager of the buying group approached Anne Mulholland,
director of casualty brokerage with Aon Risk Solutions, to help resolve the problem.
Recognizing that this was both a structural and brokerage challenge, Mulholland was
able to convince the group’s excess carrier to drop down to the group’s sublimit, which was
considerably lower than the excess carrier’s typical attachment point.
As a result, the group of schools now has $74 million in sexual misconduct coverage.
“Our board was thrilled that Anne was able to secure coverage limits exceeding their
expectations,” the group’s executive director said. “She provided a nice combination of
helping us buy coverage and helping us operate within those coverages.”
The 14 schools in the buying group are both big and small, and represent “a mixed bag” of
risk issues, he said.
“Frankly, we dodged some bullets,” he said. “We had some issues that could have
exploded into nasty lawsuits but didn’t. We stayed out of court.”
In one instance a cheerleader was dressed very inappropriately while cheering. With
Mulholland’s help it all worked out. “We’re insuring stupidity if nothing else,” the executive said.
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Division President Arthur J. Gallagher & Co., Quincy, Mass. A Market Shaper One of Teresa Koster’s greatest values to her clients is her pull with underwriters. Koster, a division president with Arthur J. Gallagher Risk Management Services Inc., specializes in student health insurance programs and is hailed for creative solutions.
“She helps shape the market,” said the risk manager of a New England nonprofit
educational consortium of private liberal arts colleges that includes as a member a campus
of a state university. “She is able to convey what products and services are needed to help
underwriters meet market needs.”
Koster, the risk manager said, “did a phenomenal job” spearheading the consortium’s
change from more traditional health and accident insurance suitable for an employer-based
program to a PPO better suited to student health requirements.
“We now have better coverage than the state mandates and we meet both the schools’
and the students’ needs. As we wait to see what the impact of health insurance reform will
be on our budgets, I feel confident that we’re ahead of the curve.”
Although carriers dug in their heels when Massachusetts law mandated that a Catholic college
provide students with coverage for abortions, Koster proved you can fight the statehouse.
“It was a bit of a struggle to get it around our health carrier,” said the college’s risk manager.
“It’s difficult to not provide what the state said we must provide.”
Deneen Schmitt
Senior Vice President Willis, Pittsburgh Making the Impossible Possible Increasing insurance regulations facing the health care industry are well documented, but other industries are under the microscope as well, including the for-profit higher education industry, where litigation facing directors and officers is active, to say the least. As its renewal date approached, a publicly traded higher
education company found itself the target of a securities class action claim related to its recent
IPO. The client also was facing a qui tam (whistleblower) action related to alleged improper
incentives paid to recruiters. It also faced a lawsuit related to unnecessary accreditation and
lack of career options and had been subpoenaed by a state’s Attorney General. The U.S.
Department of Justice also ended up investigating the company for alleged deceptive student
lending and marketing practices.
In most instances, structuring a renewal program that would be favorable to this client
would be difficult, if not impossible. But Deneen Schmitt, a senior vice president for Willis,
made it happen for the company’s $75 million D&O program. The company paid the same
premium as the previous year, and also got a new $15 million layer of side A, DIC coverage,
which was added without a warranty.
“She’s just fantastic,” said the risk officer of a large university client. “We really challenge the
underwriters, and Deneen really pushes them.
“We wound up with better coverage at a very reasonable price,” he said. “We saved 10 or
15 percent.”
Nancy Sylvester, CPCU, ARM-P
Broker Fixes Holes in Buildings and Coverage Nancy Sylvester’s clients sing her praises all over Louisiana. Wind percentage deductibles are a common theme. For a Jesuit college, Sylvester, a managing director with Arthur J. Gallagher Risk Management Services Inc. worked hard with Lloyd’s of London to provide a new product with one of the lowest percentage wind
deductibles within the market.
Managing Director
Arthur J. Gallagher & Co., Baton Rouge, La.
