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In Social-Services World, Pressure To Cut Costs, Find Alternative Revenue Streams Raises Risk Profile

With a still-shaky economy limiting donations to social-service organizations, many of these groups are being forced to radically reduce spending or to branch out into new and untested revenue-raising watersa move which can pose unexpected and even catastrophic risks.

By Bonnie Cavanaugh, E&S Editor | Updated on August 11, 2011

With a still-shaky economy limiting donations to social-service organizations, many of these groups are being forced to radically reduce spending or to branch out into new and untested revenue-raising waters—a move which can pose unexpected and even catastrophic risks.

Philadelphia Insurance Cos. is one of the largest carriers in this specialty-insurance line, with 46 offices in 13 regions writing more than $750 million of “human services” premium per year. And many of its more than 26,000 social-services clients are feeling increased pressure “to significantly cut costs” and “find alternative sources of revenue,” says Paul Siragusa, vice president, Commercial Lines Underwriting.

This situation is creating a double-barreled loss danger. On the one hand, less money is being spent on risk-mitigation processes such as employee training, updates to an insured’s facilities, general housekeeping and vehicle maintenance. And on the other hand, exploring alternative income avenues carries heightened exposures.

Examples of these new opportunities that carry additional risks can be found in states that are putting formerly government-run programs, such as adoption, foster care and other children’s services, into the hands of social-service organizations.

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