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1. Course Introduction Welcome!  Introductions  Icebreaker  Housekeeping  Agenda.

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Presentation on theme: "1. Course Introduction Welcome!  Introductions  Icebreaker  Housekeeping  Agenda."— Presentation transcript:

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2 Course Introduction Welcome!  Introductions  Icebreaker  Housekeeping  Agenda

3 Course Introduction  Housekeeping  Ground Rules –Be on time –Listen to and show respect for the opinions of others –No disruptive side-conversations –Cell Phone and PDAs off  Facilities  Breaks  Lunch  Parking Lot

4 Professional Management Development Program (PMDP)  M-100 Essentials of Community Association Management  M-201 Facilities Management  M-202 Association Communication  M-203 Community Leadership  M-204 Community Governance  M-205 Risk Management  M-206 Financial Management Course Introduction

5 Course Materials  Participant Guide –Lessons –Activities  Course Evaluation Forms  Course Exam  CD-ROM  M-205 Website  GAP: Risk Management Course Introduction

6 M-205 Website  Samples, articles, resources and much more

7 Focus of Course  Developing risk management awareness.  Developing the habit of thinking –beyond maintenance, beyond property –to include liability, net income, and personnel concerns, as well. Course Introduction

8 Importance of Course  Risk management—including a sound insurance program—is a key aspect of preserving and protecting an association’s assets.  It demonstrates management’s ability to manage both assets and crisis situations. Course Introduction

9 Speak as an association or a member  Just because you maintain something, doesn’t necessarily mean you own it or insure it.  Just because you insure something, doesn’t necessarily mean you own it or maintain it. Course Introduction

10 Examples:  In some homeowner associations, member owns the building, but the association maintains and insures it.  Condominium associations often insure unit interiors, which may include real property owned and maintained by members. Course Introduction

11 Module 1: Risk Management

12 Focus: How to apply the risk management process to community association  using property as the primary example of exposures to possible loss. Risk Management

13 Module Objectives  Conduct an initial inventory of an association’s current risk management situation.  Use appropriate resources to identify an association’s exposures to possible loss.  Recognize and respond to exposure to possible loss that requires immediate attention. Risk Management

14 Module Objectives  Analyze an association’s exposures to possible loss.  Identify roles in developing a risk management program.  Identify alternative risk management techniques. Risk Management

15 Why Risk Management Awareness?  Can’t take chance of your association suffering a loss  If a loss is perceived as an accident that couldn’t have been anticipated, you’re lucky.  If you anticipate and then prevent or prepare for an accidental loss, you’re perceived as valuable—not just lucky Risk Management

16 Lesson 1: Risk Inventory

17 Lesson Objective  Conduct an initial inventory of an association’s current risk management situation. Risk Inventory

18 Why is an initial inventory necessary?  Crisis  Claim Risk Inventory

19 Activity # 1: Conduct an Initial Inventory Purpose: To develop the ability to do an initial assessment of an association’s current risk management situation. Risk Inventory

20 Directions for working in groups. 1.Choose a leader. This person is responsible for helping the group move through the steps in an activity, keeping the group focused, and getting everyone involved. 2.Choose a timekeeper. This person is responsible for keeping the group posted on how much time it has left to complete an activity. 3.Choose a recorder when appropriate. This person is responsible for recording a summary of the group’s ideas – and presenting it to the rest of the class, when appropriate.

21 Lesson 2: Exposure to Loss

22 Lesson Objectives  Recognize and respond to exposure to possible loss that requires immediate attention.  Use appropriate resources to identify an association’s exposures to possible loss.  Analyze an association’s exposures to possible loss. Exposure to Loss

23 Ability to recognize depends on:  Managerial experience.  Risk management expertise.  Available time. Exposure to Loss

24 Insurance Terms Related to Exposure to Loss Exposure to Loss  Advertising Injury (Al)  Bodily Injury (BI)  Directors’ & Officers’ Liability (D&O)  Employment Practices Liability  Liability Exposure  Net Income Exposure  Personnel Exposure  Personal Injury (PI)  Property Damage (PD)  Property Exposure  Wrongful Acts

25 Types of Exposure to Loss:  property  net income  liability  personnel Exposure to Loss

26 Example of Exposure to Loss: An increase in expenses as a net income loss: Any expenses associated with another type of loss, such as legal expenses or the extra expenses to set up an office at another location if the current site is damaged. Exposure to Loss

27 Immediate Treatment  Delays  Deficiencies  Defects Exposure to Loss

28 Response time depends on:  Authorization  Resources  Schedule or timing Exposure to Loss

29 Activity #2: Exposure to Possible Loss that Require Immediate Attention Purpose: To develop the ability to recognize and respond to exposures to possible loss that requires immediate attention. Exposure to Loss

30 Lesson 3: Risk Management Roles

31 Objective Identify roles in developing a risk management program. Risk Management Roles

32 A manager is responsible for:  Planning,  Organizing,  Leading, and  Controlling Risk Management Process Risk Management Roles

33 A manager should…  Review exposures.  Communicate issues to the board.  Manage insurance program. Risk Management Roles

34 Community Association Insurance Agent:  Historically the agent represented the carrier and the broker represented the insured.  These distinctions don’t always hold today. Risk Management Roles

35 What an agent ought to …  Suggest insurance policy coverage.  Obtain premium quotations.  Arrange coverage placement.  Arrange premium financing.  Provide loss runs in a timely fashion. Risk Management Roles

36 Agent may assist with…  Reporting claims.  Identifying and analyzing exposures.  Valuation of exposures.  Compliance with legal requirements for insurance.  Development and implementation of disaster planning. Risk Management Roles

37 What an agent may do depends on…  Legal constraints under state statutes and licensure.  Contract with the insurance carrier.  Contract with the association, if any.  Knowledge of the community association. Risk Management Roles

38 Activity #3: Identify Insurance Agent Roles Purpose: To identify the roles of an insurance agent. Risk Management Roles

39 Agent should not …  Offer advice outside area of expertise.  Assume responsibility for association risk management and insurance program.  Become involved in internal association disputes.  Estimate damage.  Collect assessments.  Contact other insurance carriers or agents. Risk Management Roles

40 Lesson 4: Risk Management Techniques

41 Objective  Identify alternative risk management techniques. Risk Management Techniques

42 Next Steps  Analyze an association’s exposure to possible loss.  Review alternative risk management techniques. Risk Management Techniques

43 Risk Management Discussion  What’s the difference between loss frequency and loss severity?  What’s the difference between loss prevention and loss reduction? Risk Management Techniques

44 Contractual Transfer Risk Financing Risk Control

45 Risk control involves the following five techniques: 1. Exposure avoidance 2. Loss prevention 3. Loss reduction 4. Segregation of exposures a.Duplication b.Separation 5. Contractual transfer a.Legal and fiscal responsibility

46 Risk Financing Risk Retention: Pay for Yourself 1.Current expensing 2.Unfunded reserve for loss 3.Funded reserve for loss 4.Borrowing Risk Transfer: Find Someone Else to Pay 1.Transfer to a commercial insurer 2.Contractual transfer —Hold harmless and indemnification agreement

47 Activity #4: Applying Alternative Risk Management Techniques Purpose: To practice applying the risk management process to a specific exposure to loss. Risk Management Techniques

48 Select Appropriate Technique  Association Obligation  Association Need  Owner Expectation Risk Management Techniques

49 Examples  Obligation— The governing documents require the association to maintain certain coverage.  Need— Type and condition of association assets involve certain exposures to loss.  Owner expectations— May vary in terms of how high a deductible they think the association should assume. Risk Management Techniques

50 Activity #5: Risk Management Techniques for Exposure to Loss Purpose: To practice preparing a risk management report to a board of directors. Risk Management Techniques

51 Module Summary Focus: How to apply the risk management process to community association using property as the primary example of exposures to possible loss.

52 Module Summary Module Objectives  Conduct an initial inventory of an association’s current risk management situation.  Use appropriate resources to identify an association’s exposures to possible loss.  Recognize and respond to exposure to possible loss that requires immediate attention.

53 Module Summary Module Objectives  Analyze an association’s exposures to possible loss.  Identify roles in developing a risk management program.  Identify alternative risk management techniques.

54 Discussion Questions  Why is it important to inventory as association’s risk management situation?  What are some common exposures to loss for a community association? How might this differ by housing type—high-rise condominium vs. large-scale community?  What is the role of the board in developing a risk management program? A committee? Management? Residents?  Discuss some alternative risk management techniques? Explain how you might incorporate these techniques at your association.

55 55

56 Module 2: Role of Insurance in Risk Management

57 Focus: Implement risk management techniques in the risk management process. Role of Insurance in Risk Management

58 Module Objectives  Identify important aspects of an association’s fact sheet  Identify important request for proposal terms  Identify and describe the various types of insurance coverage typically found in community association programs.  Identify bid specifications for a insurance proposal  Identify and define claim process terms.  Identify perils of an incorrect claim process. Role of Insurance in Risk Management

59  The next step is to implement the risk management techniques selected by the board.  This transfer of risk financing begins with the development of an insurance request for proposal, including an association fact sheet and bid specifications. Role of Insurance in Risk Management

60 Lesson 1: RFP Terms and Fact Sheets

61 Lesson Objective  Identify important aspects of an association’s fact sheet.  Identify important request for proposal terms. RFP Terms and Fact Sheets

62 Activity #1: Discuss Insurance Terminology use in a RFP Purpose: To become familiar with the terms and concepts found in an insurance request for proposal for a community association. RFP Terms and Fact Sheets

63 Uses for an Association Fact Sheet  Helps manager identify and evaluate exposures to possible loss—a risk management control.  Demonstrates management’s ability to manage to the board, the agent, and the carrier.  Provides an inventory of the association’s real and personal property that can be used for other purposes.

64 Activity #2: Association Fact Sheet Purpose: To become familiar with the purpose and content of an association fact sheet for insurance coverage. RFP Terms and Fact Sheets

65 Lesson 2: Insurance Coverage and Bid Specifications

66 Lesson Objectives  Identify and describe the various types of insurance coverage typically found in community association programs.  Identify bid specifications for a insurance proposal. Insurance Coverage and Bid Specifications

67 Common Insurance Coverages for Community Associations  Property Coverages  Liability Coverages  Net Income Coverages  Personnel Coverages Insurance Coverage and Bid Specifications

68 Workers’ Compensation/ Employers’ Liability Insurance Workers’ Compensation 1.Does an association with no payroll need workers’ compensation insurance? Employers’ Liability 1.How is employers’ liability different from statutory workers’ compensation? 2.How is employers’ liability different than employment practices liability?

69 Four Basic Questions to Ask About Insurance Coverage 1.What or who is covered? 2.For what events are they covered? 3.For how much are they covered? 4.Are there any qualifications to coverage? Insurance Coverage and Bid Specifications

70 Sample Partial Bid Specifications  Commercial Package Policy  Continue Fidelity  Commercial General Liability (CGL)  Directors’ and Officers Liability (D&O)  Umbrella Liability Insurance Coverage and Bid Specifications

71 Activity #3: What to include in a Bid Specification for Insurance Purpose:  To become familiar with the most common provisions that appears in bid specifications for community association insurance.  To call attention to special provisions and issues this could be problematic for an association. Insurance Coverage and Bid Specifications

72 Bid Specifications  Property Insurance

73 Bid Specifications  Fidelity Insurance

74 Bid Specifications  Commercial General Liability (CGL) Insurance

75 Bid Specifications  Directors and Officers (D&O) Insurance

76 Bid Specifications  Umbrella Liability Insurance

77 Insurance Coverage and Bid Specifications Monitoring a Community's Insurance Program  Insurance is a contract.  People are expected to be familiar with the contracts that they enter into.  This holds for insurance.

78 Insurance Coverage and Bid Specifications Insurance contract should be reviewed:  When the association first obtains a policy.  When a change is made in the policy coverage during a term. When a policy is renewed.  When a loss occurs.

79 Insurance Coverage and Bid Specifications Parts of an Insurance Policy  Declaration Page  Forms  Endorsements  Optional Coverages  Common Policy Conditions  Glossaries

80 Insurance Coverage and Bid Specifications Insurance Folder  Assemble the insurance policies in the folder using the declaration pages as your guide  Use the declarations page as a “table of contents” to locate the separate forms included in a policy

81 Insurance Coverage and Bid Specifications  Think of an insurance policy as a reference document.  You don’t sit down and read it cover to cover as you would a book.  But you must be able to locate information in it—with or without your insurance agent’s help.

82 Activity #4: Organize an Insurance Folder Purpose: Small groups organize an insurance folder and locate major coverage provisions in an insurance policy Insurance Coverage and Bid Specifications

83 Lesson 3: Claims

84 Objectives  Identify and define claim process terms.  Identify perils of an incorrect claim process. Claims

85 How does your association insure:  On-Your-Own Association  Side-By-Side Association  Above-And-Below Association Claims

86 Does your list include all four types of exposure to loss?  Property  Net Income  Liability  Personnel Claims

87 Steps to Take When You Find Out About Any Potential Loss 1.Protect life and property from further damage. 2.Keep detailed and accurate records. 3.Always tell the truth. 4.Avoid saying anything that suggests the association or management is responsible for what happened. Claims

88  Restrict records to a description of facts.  There are pros and cons to keeping records.  Their benefit is that they help recall and support your version of a situation.  They are a disadvantage if you have done something wrong—or failed to do what you should have done. Claims

89 How to Decide Whether to Report a Loss:  Property Loss  Employee Injury  Liability Loss Claims

90 Liability loss  An injured party’s prior condition is immaterial to the association’s liability for bodily injury—even though it may lead to greater injury and therefore greater liability.  If an allegedly injured party makes a claim against the association’s liability insurance directly to the insurance agent, the agent must report the claim to the carrier. Claims

91 How much to confer with agent:  Agent represents the carrier  May have to act on information you divulge  Vary in how they respond to privilege information  Know your agent  Explore issues in the abstract Claims

92 Self Insurance  If an association decides not to report an actual loss, it is deciding to retain financing of the loss—or to self-insure it.  Risk retention essentially is self- insurance. Claims

93 Sample Claims Report  Fact Section  Public Adjuster Claims

94 First Party/Third Party Coverage  When the association makes a claim under its own policy, it is a first-party claimant.  When the association makes a claim against another party’s liability insurance, it is a third-party claimant. Claims

95 1.Identify exposures to loss 2.Analyze 3.Review alternative risk management techniques 4.Assist board to select 5.Implement 6.Monitor and improve risk management program. Claims

96 Module Summary Focus: Implement Risk Management techniques in the Risk Management Process

97 Module Summary Module Objectives  Identify important aspects of an association’s fact sheet  Identify important request for proposal terms  Identify and describe the various types of insurance coverage typically found in community association programs.  Identify bid specifications for a insurance proposal  Identify and define claim process terms.  Identify perils of an incorrect claim process.

98 Discussion Questions  What are some important aspects of an association’s fact sheet and bid specifications?  Describe a time when you were involved in a claim process. What went well? What could have been improved upon?  Name and explain the differing types of insurance coverage for community associations.  Are there any types of coverage you believe your association needs? What can you do to start the process?  What are some potential perils of an incorrect claim process?  What is the most challenging aspect of risk management?  Describe a situation you are struggling with and ask the members of your class for advice.

99 Course Evaluation  Please be sure to fill out your course evaluations.  Your feedback is important to us.

100 Course Exam  50 questions  Multiple choice  Results will be mailed within 4-6 weeks, if not sooner  Good luck!

101 Contact CAI 225 Reinekers Lane, Suite 300 Alexandria, VA (888) (M-F, 9-6:30 ET) (703) (Fax)

102 Thank You!  For participating in this course  For your support of CAI and the Professional Management Development Program


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