That’s Not What Insurance Is For: The Truth and Fallacies of Risk Management

This is a story from my time as a Head Start Director

We were having our monthly Policy Council meeting. The group is a shared governing body made up of mostly Head Start parents. There was a typical agenda, except tonight the agency’s fiscal director was a guest; making a presentation on in-kind and the budget to the representatives.

During the course of the meeting, the discussion turned to the use of parent activity funds, and one of the centers made their request, a project that included a trip to a nearby community swimming pool with the children and families of the center. As my many many months of training and "teachable moments" had prepared them, the parents began discussing aspects of risk management: How many parents versus children would be in attendance? Who would be responsible for life guard duties? Etc.

I was so proud. It was one of those moments for an educator. You know, when you see you no longer have to instruct, the students have become the teachers.

And then it happened. Just as the long term parent reps were instructing the newer ones about the groups past examples of not approving activities because they presented too much of a risk of injury or liability for the program, the Fiscal Director chimed in.

He said, "If you ever want to do something, just give me a call. That’s what we have insurance for."

"That’s what we have insurance for."

I couldn’t believe it. I cringed. Both because I saw months of training possibly going down the drain, and because I couldn’t believe he felt that way. But then again, too many people associate risk management with just having insurance.

Maybe it’s the fact that I’m the daughter of a man who has been in the insurance and financial planning industry for more than thirty years; I learned a long time ago that insurance is just a very small piece of risk management. The piece you use only when you’ve mitigated all the risk and liability you can, but you have to protect yourself from that which you can’t control or predict.

If you have auto insurance, does that mean you drive recklessly or leave the keys in the ignition with the door open? You might have home owner's insurance, but does that mean you barbecue indoors with a backyard charcoal grill?

No.

Yet many approach risk management in their business in this manner; thinking having insurance gives them license to act recklessly.

Risk management, like anything worth doing, is a process that takes time and due diligence. For any business, agency or entity involving at least one person, risk management means looking at all of the possible negative variables, determining which ones are probable, and of the more probable risks, which ones can be the most damaging.

So now that you’ve figured out what you have to worry about, now what? Well now you figure out if there is anything you can do and worth doing to reduce or mitigate that risk.

If there is, do it!

The very last piece is to construct a safety net of insurance to protect you from what all of your due diligence could not have foreseen.

For me, one of the biggest challenges for a program spread across such a large geographic area was that I had to trust that remote staff and parents have similar philosophies of risk management to my own. If they did’t, I needed to do a very good job of training and educating them. One of the most important tools in risk management is training and education.

Luckily for me, my months of training the Policy Council did the trick. The group proceeded with their task of denying the pool party, for lack of definitive plans for safety and oversight; undeterred by the misguided advice of the fiscal director.