School districts are just like homeowners, renters, drivers, and small businesses—they need insurance, even as it’s become prohibitively expensive.
The 900-student Davis district in southern Oklahoma spent $61,000, or roughly $68 per student, on liability insurance for the 2019-20 school year. Last school year, the cost for the same coverage was $150,000, or $167 per student.
Next school year, it’ll be $261,000, or $290 per student. That’s a 328 percent jump just in two years.
“That’s the cost of two teachers,” Mark Moring, the district’s superintendent, said of this year’s increase. “For a school like us, that’s a whole grade level worth of math textbooks or science textbooks.”
District leaders in states like Alaska and Minnesota have recently reported similar challenges. Major insurance companies like State Farm and Allstate are pulling out of offering home insurance in states like California. In the Des Moines, Iowa, schools, insurance companies are providing less umbrella coverage and covering more types of claims only after a district pays its rising deductible, said Shashank Aurora, the district’s chief financial officer.
Why is the cost of insurance rising so precipitously? Several factors provide clues.
For one, climate change is causing more frequent natural disasters that affect school district operations and require insurance companies to pay out. And it’s not only districts in hard-hit areas that see higher premiums as a result.
Districts’ coverage costs are increasingly determined by what’s happening nationally, not just in their own communities, said Kelli Hanson, executive director of the Schools Insurance Group, which provides insurance to schools in California.
“The more hurricanes we have in Florida, we’re impacted. The more flooding in the Midwest, we’re impacted,” Hanson said.
The state’s smallest school districts face the steepest risks, Hanson said. If a district with a single school building has to close because of wildfires, students and staff can’t just relocate to another school building or nearby district office, so they have to find entirely new facilities, which can often be quite expensive.
“Those are the ones that are usually a more costly claim,” Hanson said.
Meanwhile, new laws allowing more lawsuits over sexual abuse are putting school districts in an unflattering legal spotlight—while also contributing to higher insurance premiums because of the added legal liability. In California, for instance, a new law passed in 2019 dramatically extends the statute of limitations for plaintiffs to sue over child sexual abuse, including in schools.
Districts have had to pay millions of dollars out of their own budgets as a result because they often didn’t have robust insurance coverage at the time these events took place, Hanson said.
In West Virginia, the state’s Board of Risk and Insurance Management recently announced liability insurance rate hikes that could double or triple the annual amount districts have to pay, WV Metro News reported. School boards there are lobbying state lawmakers to place tighter caps on the amount school districts are required to pay plaintiffs in physical abuse cases.
Cybercrime and insurance market volatility are factoring into higher premiums
The growing frequency of cybercrimes is another factor putting districts at risk. The Shanksville-Stonycreek district in southwestern Pennsylvania saw cybersecurity insurance costs triple after a hacker got access to some of the district’s files in 2019, said Sidney Clark, the district’s business manager and board secretary.
And some districts have adopted controversial policies that are alienating their providers altogether. In Iowa, at least two districts nearly lost insurance coverage recently after they announced that they would be allowing teachers to carry guns on campus. After consulting with other providers who also wouldn’t commit to coverage, both districts have since nixed the policy.
Districts in Louisiana, Missisissippi, and Ohio have gotten some latitude from state and local governments to arm staff members after legislation that’s passed since the deadly school shooting in Uvalde, Texas, last spring. But those schools would likely also risk wariness from insurance providers.
Some insurance woes have nothing to do with districts themselves, but rather with the volatility of the insurance industry. Providers have had a harder time staying afloat given the increased claims of all types in recent years, leaving less competition to drive rates down, said Geoffrey Sinclair, an Oregon-based insurance agent who works with dozens of school districts and serves as vice president of public sector practice at Brown & Brown.
That’s true in Oklahoma, where one of two main providers of school property and casualty insurance shut down during the pandemic. As a result, Moring said, he has no choice but to sign up with the Oklahoma School Insurance Group (OSIG), no matter what its coverage plan looks like.
In turn, OSIG has struggled to keep rates down for the hundreds of districts in its membership, said Rick Thomas, a retired superintendent who has served as OSIG’s executive director for the last school year.
Over the last three years, Thomas said, OSIG has raised from $14 million to $30 million the amount of money it pays out to districts directly before seeking reimbursement from re-insurers—external companies that charge higher premiums.
It’s also increased the number of re-insurers that cover a percentage of schools’ annual claims from 25 to 70 in an effort to hold the line on premiums. Companies are more willing to take on districts’ claims if they’re covering a smaller piece of the overall pie, Thomas said.
Districts have a role to play in protecting against losses
School districts aren’t entirely powerless to stop insurance costs from swelling. In many cases, providers want to see that districts are proactively preparing for the unlikeliest scenarios.
Schools with safety plans with details on how they’ll deal with wildfires—what they’re doing to keep shrubbery away from buildings, how they’ll evacuate if necessary, for instance—are more likely to receive favorable insurance coverage, Hanson said.
In Pennsylvania, Clark said his district has worked with its insurance providers to demonstrate that it’s staying on top of the latest cybersecurity threats.
And in Oklahoma, Thomas said OSIG is launching a pilot program with 25 schools to install sensors that alert facilities teams when pipes are freezing and in danger of bursting.
He also encourages districts, within their means, to proactively replace leaky or outdated roofs. That’s easier said than done for districts in many states that struggle to secure voter support or state aid for building maintenance.
Insurance challenges are intertwined with the broader issues schools are facing, Hanson said.
“We all have to do our part,” she said. “If we can do that, then hopefully it will get us in a better spot.”
