2021 Policy Updates

Over the past few years, UE and our members have seen a dramatic increase in the cost to resolve claims. Both settlement and defense costs have increased exponentially. In fact, from 2015 to 2020, losses for both generally liability (CGL and GLX) and educators legal liability (ELL) claims doubled.

This trend is affecting the entire insurance industry. The term “social inflation” is used to describe societal changes that have resulted in increasingly large jury awards. More sophisticated legal strategies are also being deployed to affect juror sentiment about the impact of damages.

Class action lawsuit abuse is also on the rise as the public’s confidence in big business has fallen to historic lows and attorney advertising has increased significantly.

These factors have required UE to update our policy terms to reflect the current environment. As always, we are committed to providing critical liability insurance needed by education.

Many factors are involved in establishing annual premiums. 2021 premium increases reflect the sharply rising cost of claims. While UE’s structure is a risk-sharing agreement among the schools, colleges, and universities we insure, no one claim, or handful of claims, is responsible for the loss trends we are seeing. High loss trends are occurring across all lines of business and most types of claims, requiring us to increase premium in order to prepare for losses.

Like other insurance carriers, UE conducts an extensive, annual actuarial analysis to determine premium levels, considering the prior year’s loss experience, frequency and severity loss trends, as well as individual member situations and exposures.

UE’s Subscriber Advisory Board, comprised of education and financial experts elected by our membership, conduct an annual review of UE’s financials and determine the formula for retaining or distributing funds from individual Subscriber Savings Accounts (SSA). As they did in 2020, the Board determined that concerns over rising claims costs warranted continued building of surplus and decided to retain the funds in the SSA.

While a member’s past claims experience is a vital piece of the pricing calculation, it is far from the only piece. Indeed, even a member who has been claim free for five years still has a significant chance of a claim this year. The exponential increase in settlement and defense costs means that any claim that does occur will likely cost substantially more than it would have in the past – and premiums have been adjusted to reflect this. To avoid having a few very large claims distort our severity (average cost of claims) trend, UE’s actuaries have looked at trends removing such claims and at industry trends to ensure our forecasted trends are reasonable.

To help tailor a premium to a member, UE does of course include prior claims experience in the calculation, as mentioned. A member with no claims will receive a lower premium increase, all else equal. Other parts of the individual institution profile do contribute to the premium calculation, however. An increasingly important factor in pricing is geographic location, as some states have more challenging legal environments than others; some of the other pricing factors include the institution size, budget, and type of institution.

To best protect our members and UE, we have strong, long-standing relationships with several reinsurer partners. A large part of our ability to provide high limits is dependent upon the reinsurers’ evaluation of UE and loss trends. As reinsurers are doing with other commercial insurance carriers, our partners have capped coverage at $30 million in response to rapidly increasing severity of claims.

Beginning with policies renewing on or after May 1, 2021, defense costs provided under the ELL policy will be part of, and not in addition to, the limit of liability, whether the Select or Approved Defense Counsel provisions in paragraph eight applies.

A fundamental principle of insurance is that it indemnifies the losses of the few using resources of the whole. Because a pandemic or epidemic impacts all insureds — and at roughly the same time — the principles of insurability don’t apply.

Consequently, UE’s CGL, GLX and IPL policies effective on or after Jan. 1, 2021 exclude the ongoing COVID-19 pandemic as well as future pandemics, epidemics, or public health emergencies as declared by designated authorities.

Recognizing the impact on institutions of an outbreak of other infectious diseases, such as mumps or meningococcal infections, UE’s CGL, GLX and IPL policies provide coverage for communicable diseases, subject to their terms and conditions.

To meet the evolving needs of our members, UE has expanded telemedicine coverage. This coverage is available by endorsement after an underwriting review of UE’s supplemental application.

UE does not charge additional premium for telemedicine coverage. If approved for your policy, telemedicine coverage is included in the overall policy premium.

UE recognizes that specialized carriers addressing cyber-related issues are well positioned to provide coverage and response for cyber-related claims. Excluding cyber liability from the CGL, GLX and ELL policies removes any overlap with other carriers’ cyber liability policies specifically designed to cover this exposure, allowing UE to focus on risks for which we have specialized underwriting expertise.