Positioned within the remit of Gallagher’s public sector and education division, the broker and risk management giant’s education team looks after about 500 schools and colleges, and circa 40 university clients. It’s a scope that gives Phil Webster (pictured), Gallagher’s executive director of education, hands-on insight into the challenges facing higher education institutions amid tumultuous external market conditions.
“Post-pandemic, a lot of universities are facing competition for student places, and there are also capacity issues as well,” he said. “Universities broadly are facing financial concerns. Student fees have been capped for 10-plus years now at £9,500. There is some subsidy from the government but, particularly in an inflationary environment, that fee-capping piece is biting in terms of the budgets and financial resources of universities.”
Webster noted that the sector is further complicated by the diversity of the coverage required by these institutions as these tend to be organisations with big estates and multiple different types of buildings. In addition, he said, the student population is more demanding now – not least given the inflationary environment, but also around the theme of student welfare.
“At the moment, there’s a lot of debate around the duty of care universities have to students,” he said. “There is a petition that has gone to government around putting a statutory instrument, or legislation, in place defining that duty of care. Currently, it’s just based around legal precedents, historic precedents, but a statutory instrument could really change the direction of traffic by making that almost akin to strict liability.”
That student welfare theme is especially complex, Webster said, because you’re talking about people who are legally adults but, in reality, are just on the cusp of adulthood, and facing being away from home in strange environments. It also calls to mind questions about the limitations of personal responsibility – and until when and to where a university’s duty of care should extend.
“Universities are balancing a really broad range of risk areas, which some of them are struggling with,” he said. “And what’s the role of insurance within that? We always say that insurance is the last piece of the risk management jigsaw. You do all the management of risk, and then insurance is used to transfer away the risk that you can’t retain or control. It’s not less or more important, what we need to understand is the context of how risk is being managed before we come to the transfer.”
Amid current market conditions, universities are increasingly willing to embrace the role risk management has to play in making them a better risk. They want to have long-term stable insurance relationships, he said, and they want an insurance policy that understands and reflects their individual risk profiles.
To meet this demand, Gallagher deploys a range of different services, among them its CORE360 tool which provides benchmarking of clients’ insurance programmes around rates, limits of indemnity, programme structure, etc. However, he said, the more interesting utilisation of the tool is its risk mapping feature.
“So, we do a survey of all the leaders within the organisation across all the different business functions including HR, legal, financial, estates & facilities, international – and we get their views on risk,” he said. “By their own admission, universities are very siloed organisations so what we need is that cross-communication on how their risk is managed and what their tolerance and approach to risk is across the university.
“By getting individuals’ different views and then mapping them out, we can go back to the university and say, ‘this isn’t us telling you about your risk environment, this is you telling us’.”
Very often, these functions don’t really have the opportunity to talk about risk, he said, and so Gallagher’s focus is on elevating and coordinating the level of discussion about managing risk in the education sector. He noted that CORE360 has illuminated some interesting areas of exposure, including around intellectual property – a key consideration for many higher education institutions.
“Insurance, historically, has been a little reactive to that,” he said. “It’s only third-party cover in the event they breach somebody else’s intellectual property. But what we’re seeing now is insurers highlight the need for universities to protect their own intellectual property, and to provide a cover to allow them to pursue other people if they breach that.”
Institutions are calling for increased stability in the higher education insurance market and they’re looking for the best practices support and insight that make their insurance coverage relevant to them. Webster noted that the role effective risk management plays in creating a sustainable higher education insurance marketplace is especially clear at the moment because the market was significantly impacted by hard market conditions.
“This was due to a combination of factors,” he said. “Obviously, we had the change in the market generally but then we’ve also had a fairly significant market withdraw from certain risks… What we’ve been trying to do is say, ‘look, can we have a longer-term view of what your plans are?’ And it’s really interesting because I do think universities are prepared to have those conversations.
“Some of our clients have been around for 400 years, they aren’t going anywhere. What they want is budgetary stability - and so our job as brokers is to try and encourage insurers to take a longer-view view around rating and policy coverage… Universities are looking for long-term support from their insurers. And that’s the message we’re trying to get there – that this isn’t about a short-term fix to a hard market problem, this is about finding long-term solutions.”
