Challenges Persist Amid Increasing Market Stability for Education Insurance

Despite facing continued challenges in property and liability coverages, educational institutions and school districts can expect a relatively stable insurance market throughout 2024.  

As Alera Group’s 2024 Property and Casualty Market Outlook forecasts, premium increases will likely be comparable to 2023. But the end of the COVID-19 public health emergency and moderating inflation are good news for schools, which have weathered a volatile market in recent years.   

Although COVID-19 litigation has affected education in some quarters — for example, the state of California recently settled a class-action lawsuit alleging that education officials’ lack of oversight and support for remote learning after the pandemic’s onset disproportionately hurt low-income students — pandemic-related lawsuits haven’t been prevalent. The main concerns for the sector remain liability exposures pertaining to employment practices and sexual misconduct.   

Vulnerability to increasingly large judgments — including so-called “nuclear verdicts” of $10 million or more handed down by juries — and rising defense costs underscore the importance of liability coverage for K-12 schools and higher-education institutions. A recent study by United Educators, a risk retention group that provides Liability Insurance to its members, found that the number of jury awards of at least $1 million in school liability cases has risen sharply since 2021, with losses of $1 million or more alone totaling $651 million in 2023. 

Market outlook for 2024 

Here is what Alera Group had to say about insurance for the education industry in our 2024 Market Outlook:  

• “Property will continue to be a challenging line for buyers. Record industry losses due to extraordinary weather events and inflation continue to push rates up as insurers struggle to achieve positive ROI in this line of business. All buyers will likely see rate increases – regardless of their geographic location or claim history. 
• “Coverage for Title IX-related claims will remain difficult. Title IX violations, which encompass sexual harassment, discrimination and assault, present substantial challenges for educational institutions. … Capacity for this coverage is limited. Insurers will assess the potential exposure and the client's policies and procedures for mitigating risk. Some insurers may only offer limited coverage or exclude specific aspects related to Title IX. 
• “Liability remains a concern. Educational institutions are increasingly vulnerable to large judgments. According to the Large Loss Report 2023 published by United Educators, there were 69 publicly reported major damage awards and settlements of at least $1 million that affected K-12 schools, colleges and universities in 2022, compared to 38 publicly reported awards and settlements of at least $1 million the prior year. The data also shows that sexual misconduct losses grew three times faster than all other claim types over the past 15 years.”  

Addressing liability 

The trend toward higher liability costs, while present societally, is especially apparent in education. As a result, many high-profile insurance companies have exited the market, leaving only a small group of specialty carriers that offer coverages such as General Liability and Directors and Officers Liability (D&O) to schools. These companies know the risks, charge appropriately for them and demand that schools implement thorough mitigation measures.  

“Insurers will allocate their capacity to institutions with demonstrated track records for managing risk effectively,” the 2024 Market Outlook prognosticated. “When insurers make loss control recommendations, most will expect clients to comply.”  

Title IX claims are of particular concern to colleges and universities, which must address a multitude of sex and gender issues on campus. Employing a Title IX coordinator and offering consent training to students are among the mitigation measures insurers insist upon.  

Meanwhile, sexual abuse and molestation claims can affect educational institutions across the board. Liability carriers require schools to have robust screening protocols, including criminal background checks, and training for employees in areas such as mandated reporting of abuse.   

Property challenges  

Property Insurance challenges are not unique to schools, but rather symptomatic of larger issues climate change is creating for all insurance buyers. Properties in coastal areas are becoming increasingly difficult to insure, and prices for those risks are rising sharply while weather is also driving up premiums for the market at large. If there is any good news in the property arena, it’s that construction costs have begun to plateau in correlation with moderating inflation.   

As the 2024 Market Outlook observes, establishing accurate property values is critical: “Underinsured properties present a significant risk for educational institutions. Given economic changes and hyperinflation, the likelihood of undervalued assets is high. Buyers need to know their values and be able to substantiate them; otherwise, they risk pushback from insurers.”  

Cyber risk  

Although the Market Outlook classifies educational institutions as a top target for cyberattacks, insurance carriers have affected positive change over the past few years by insisting on certain procedures and safeguards for institutions to obtain insurance. By mandating measures such as multifactor authentication, carriers have forced schools to bolster their tech security. The frequency and cost of claims have moderated as a result.   

School violence  

Although shootings and other violent episodes in schools often grab headlines, they are not a major driver of claim costs compared with other liability risks. Most states have enacted laws requiring active-shooter drills and other preparedness measures, and schools have become wiser at identifying their risks. The Comprehensive School Threat Assessment Guidelines have a high success rate.   

What you can do 

Designing complex coverage requires high-level expertise in both insurance and the education industry, along with a deep understanding of the institution or school district being insured. A qualified agent or broker will work with you to present your school to an insurance underwriter in the best possible light — with thorough, clear documentation of your risk management program, claim history and financials.   

For a more in-depth look at strategies for navigating P&C market conditions in general and for the education industry in particular, read Alera Group’s 2024 Property and Casualty Market Outlook. In the Outlook, you’ll also find valuable information on factors driving the current P&C market, along with analysis categorized by industry and lines of coverage.    

About the author 

Michael Brooks, CSRM  
President, Property and Casualty  
Austin & Co., Inc, An Alera Group Company   

Michael Brooks has been an insurance executive in Alera Group’s Austin & Co. office for almost 25 years, with responsibilities including product management and carrier relationships.   

Contact information:  

• mbrooks@austin-co.com   
• Connect with Michael on LinkedIn