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A recent industry report has highlighted some “very real issues” facing Australian universities, all of which carry serious insurance implications.
Gallagher’s Q2-18 Market Overview Report points to a range of risks across the social, operational and financial fronts – including sexual harassment, increasingly common legal action and an inherently limited funding model.
“As very large, self-governing organisations that typically house tens of thousands of students and staff, own substantial properties and are engaged in seminal research, universities must work within the risk frameworks attendant on their scale and breadth exposure,” said Glenn Hanna, national head of higher education for Gallagher.
As universities require very large limits – typically in excess of $1 billion for property alone – the insurers with the capacity to write this business are already limited and becoming even more so due to a recent spate of property-related claims such as disaster damage and cladding issues.
“To obtain cover on acceptable terms it is essential that universities can demonstrate to underwriters that they have strong risk management in place,” he advised.
However, Hanna acknowledged that, at present, there are challenges across a number of fronts – perhaps most disreputable, the issue of sexual harassment and assault.
A 2017 Australian Human Rights Commission report cast higher education institutes under unwanted scrutiny as a comprehensive survey found that a quarter of students had experienced harassment while in a university setting.
The commission also released a set of recommendations for procedures and protocols to be applied in cases of students experiencing harassment or assault - but these are yet to be adopted across the board.
“All universities need to review their internal risk management procedures at an executive level or face the risk of directors and officers liability as institutions,” said Hanna.
Legal action by failed students is also a key risk for universities as a growing number of international students enroll on courses they are not equipped to complete.
“When they fail the course, they may retaliate by bringing a legal claim against the institution, and this can represent a gap in insurance cover because they are usually seeking reinstatement rather than damages,” explained Hanna.
Often motivated by a desire to stay in Australia, the failed students may seek to protract proceedings by pursuing their case through various state-based channels – a method which sometimes sees the action develop into a racial or disability discrimination case.
“Although insurance can respond to a letter of demand under these circumstances, it depends on how the claim is brought, and universities can be left with expensive legal costs,” warned Hanna.
Employment practice claims also pose a significant risk for universities and their frequency has ballooned in recent years.
“This has resulted in insurers increasing deductibles on these policies, effectively providing very limited cover above the typical cost of employment practices liability claims,” said Hanna. “In order to meet this challenge – and others outlined here – universities need to be proactive instead of reactive.”
