URMIA White Paper: Measuring the Total Cost of Risk

University Risk Management & Insurance Association

URMIA White Paper

Measuring the Total Cost of Risk November 2008

Barbara A. Davey, CPCU, ARM, CIC University of Notre Dame D. Jean Demchak, CPCU Marsh Inc. Phillip B. Dendy, CRM University of Texas System

Gary W. Langsdale, ARM Pennsylvania State University Kevin McGinnis, The Texas A&M University System Vincent E. Morris, CPCU, ARM, AIC, CRM, CIC Wheaton College (Illinois) Margaret Tungseth, CPA, MBA Concordia College (Minnesota)

Editor: Christie Wahlert URMIA

This URMIA white paper is published by the University Risk Management and Insurance Association (URMIA), P.O. Box 1027, Bloomington, IN 47402-1027.

URMIA is an incorporated nonprofit professional organization.

Editing and layout of the October 2008 URMIA white paper was completed by Christie Wahlert, URMIA, Bloomington, Indiana, and printing was completed at Indiana University Printing Services, Bloomington, Indiana.

There is no charge to members for this publication. It is a privilege of membership. Additional copies are available by contacting the URMIA National Office at the address above or at www.urmia.org. Membership information is also available. Š LEGAL NOTICE AND COPYRIGHT: The material herein is copyright October 2008 URMIA; all rights reserved.

Contents Executive Summary

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Introduction

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Total Cost of Risk: Overview

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What Comprises the Calculation of Cost of Risk?

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TCOR Impact on the Risk Management Process

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Cost of Risk Components Premium Insurance Premium Broker Commissions/Fees Self-Insured Funds Losses Expenses

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Comparative Criteria

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Alternative Funding Methods

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Cost of Capital Considerations

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Total Cost of Risk: Part of Enterprise Risk Management

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In Summary

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Appendices Appendix A: Total Cost of Risk Case Study - Upper Falls University

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Appendix B: Sample Displays of Total Cost of Risk Data

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Appendix C: Glossary

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Appendix D: Additional Resources

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Executive Summary The purpose of this white paper is to help a risk manager build a simple foundation of knowledge about the total cost of risk. The concepts and techniques presented here are intended to be broadly applicable, regardless of the size and segment an institution occupies within the realm of higher education. The cost of risk for an organization should be compared against both the benefits of the organization’s activities and the overall costs of running the entire organization. Cost of risk includes not only insurance premiums but also the cost of uninsured losses and administrative costs of risk management, such as salaries and overhead costs. Careful calculation of the cost of risk allows the institution to compare its own cost of risk data from year to year and assess the progress and success of its risk management program. Cost of risk metrics also allow an institution to benchmark its risk management data against other institutions’ cost of risk.

“Higher education will be ever more closely scrutinized for the true costs of all aspects of our business by the public and the government.

“Our colleagues are counting on URMIA not only to look down the road on these issues but to help them see around the bend...”

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—Jill Laster, Associate Vice Chancellor for Human Resources and Risk Management, Texas Christian University and URMIA Distinguished Risk Manager

Introduction There is risk in everything, and many types of risk are part of running an institution of higher education.

In recent years, increasing managerial emphasis has been placed on measuring and quantifying factors that make for good business. Risk factors are no exception. A goal of senior administrators is to manage costs, and one type of cost to be managed is the “cost of risk.” Managing the total cost of risk (TCOR), however, cannot be done unless and until those costs are carefully identified and measured.

In considering total cost of risk, the first issue to be addressed is the term itself. “Total” is something of a misnomer. Many factors at an institution of higher education contribute to its costs of risk; some of these factors are more easily quantified than others. Although it may be difficult or even impossible for an institution to capture its total cost of risk, any attempt to measure cost of risk will be a valuable step in managing those risks. By identifying and investigating factors impacting cost of risk, one might be surprised by how quickly the factors add up. As the factors affecting cost of risk are identified, though, an institution can move forward and explore how to control these various factors and their costs more effectively.

The Four Quadrants of Risk Risk is an extraordinarily complex and challenging issue. The only way to avoid risk is to close up shop and go home. That is certainly not the option administrators choose, so it is important to have a true understanding of the risks your organization faces on a daily basis. Any one of these could have a significant impact on your reputation and operational costs. Just as a financial balance sheet displays liabilities and assets by groups, a risk inventory can be used to display risks grouped by category. Although there are many ways to categorize risks, one of the more comprehensive approaches is to use the four quadrants of risk: 1) hazard risk, 2) operational risk, 3) financial risk, and 4) strategic risk.

Figure 1: The Four Quadrants of Risk in Higher Education URMIA White Paper: Measuring the Total Cost of Risk

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There are interdependencies of risk that sometimes make it difficult or impossible to isolate one type from another. Consider a fire (hazard risk) that could cause significant damage to one of your locations.

That fire could trigger an operational risk in which one or more of your employees or students could be hurt or even killed as a result of the hazard risk. The fire could also trigger a financial risk, such as a loss of income for rental property, as well as a strategic risk if it causes significant damage to your institution’s reputation. These four quadrants of risk represent one way of looking at the risks you face.

They invariably interact and overlap. Being in the business of education means taking risks, which means it is important for your organization to analyze the risks carefully and take only those risks that you are comfortable assuming. An efficient risk frontier is that point in each of your exposures to risk where you optimize the balance between risks taken and risks transferred and where your organization can afford to pay the costs of risks taken. Thus, developing your own efficient risk frontier is worth the time and effort required.

Enterprise Risk Management (ERM) is a developing discipline that attempts to manage all institutional risks. An institutional risk is defined as “any issue that impacts an organization’s ability to meet its objectives.”1 While this definition is intentionally broad, for the purposes of this document we will not focus our analysis on the true “total” cost of risk, although we will continue to use the term since it is common in the finance vocabulary. Instead, this white paper will focus primarily on risk factors which are 1) relatively easily measured, 2) consistently used by practitioners of risk management throughout higher education, and 3) applicable year after year. It is beyond the scope of this project to attempt to quantify or take into account intangible costs, such as the impact of risk adversities or strategic decisions on reputations, donations, admissions applications, or other “soft costs.” Although quantifying the cost of reputational risk is challenging, it is one of the largest risks facing higher education institutions. The potential impact of the risk requires a well-developed and well-managed enterprise risk management structure. Additional resources which provide a roadmap to the development of an enterprise risk management culture are provided in the URMIA White Paper: Enterprise Risk Management (ERM) in Higher Education.

In limiting the discussion to consistently measured objective costs, we are trying to reach a common denominator which will advance the dialogue about this subject among institutions of higher education. Not all schools will include the same variables when calculating the cost of risk.

Individual institutions may choose to include in their own calculations some risk costs that can be measured over time to investigate trends in the cost of risk in a broader sense. However, this also means that the risk costs included in any given calculation may vary widely from one institution to another and, therefore, may not be comparable across the industry. For example, a particular institution may choose to include in its cost of risk calculations a variety of factors, such as budgets for police services, environmental health and safety staff and programs, portions of legal counsel budgets to develop effective waiver and hold harmless language, consulting fees dedicated to providing advice to reduce program risks, and even some portion of the cost of sidewalk maintenance.

Although quantifying the cost of reputational risk is challenging, it is one of the largest risks facing higher education institutions.

1 Dale Cassidy, Larry Goldstein, Sandra L. Johnson, John A. Mattie, and James E. Morley, Jr., “Developing a Strategy to Manage Enterprisewide Risk in Higher Education,” National Association of College and University Business Officers (NACUBO) and Pricewaterhouse Coopers LLP (2001): 4.

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If an institution measures some of these factors, it will be important for that institution to analyze these same factors consistently over time to keep the trending faithful and meaningful. Through this consistency of variables, an individual school can build a basis for comparison from year to year within the institution and eventually be able to answer the question, “How are we doing compared to last year?”

As schools standardize the factors included in cost of risk calculations, comparisons between institutions will become more meaningful over time as well. Eventually, this standardization will allow an institution to answer the question, “How are we doing compared to the industry average?” Therefore, this document will attempt to demonstrate how to implement cost of risk tracking for several standard variables for risks found on most campuses.

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Total Cost of Risk: Overview Between the mid-1990s and early 2000s, the financial industry initiated more sophisticated analysis techniques designed to establish the TCOR of an organization and also moved toward implementing enterprise risk management (ERM). Now many industries are embracing these methods. The TCOR approach highlights an organization’s need to perform an ERM exercise in order to truly understand all aspects of its operations. This also helps the organization identify how strategic initiatives impact the TCOR. The ultimate goal of the TCOR approach is for the organization to develop a distinctive risk management approach that benefits the organization for years to come.

Calculating the total cost of risk is a systematic process that includes such issues as: • Understanding the cost drivers that affect the organization • Understanding the risks that the organization faces • Understanding the organization’s goals and strategic initiatives • Evaluating and applying the appropriate techniques to protect the assets of the organization • Measuring and managing the process effectively The process can be of benefit to both the reputation and finances of an institution. The TCOR can be used to: • Understand how the organization compares to others in the industry (benchmarking) • Communicate accountability to organization leaders, such as trustees and administrators • Validate the need for risk management functions to minimize costs • Distribute the cost of risk across the institution and serve as a funding mechanism for risk management operations (for example, if you know which departments are incurring risk costs, you may decide to charge them back for those costs) • Assist in the establishment of indirect cost percentages submitted to donor agencies on research projects While using these approaches is helpful for identifying and managing risk exposures on behalf of the institution, it is also important to calculate the TCOR in a manner that can be benchmarked against other organizations in the same industry and of relatively the same size so meaningful comparisons can be made.

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What Comprises the Calculation of Cost of Risk?

The traditional approach for calculating cost of risk is to combine the cost of insurance premiums and retained losses for the traditional lines of coverage, including workers’ compensation, property insurance, commercial general liability, self-insurance funds, and captive expense, along with other elements not directly tied to insurance premiums. These include uninsured losses, internal administrative costs, and external administrative expenses. The total is divided by a relevant financial measurement, such as the net operating budget for the institution. Keep in mind, however, that this approach currently does not include all the risks comprising the full ERM method, including financial risks or strategic risks.

Unless you retain substantial levels of risk, your insurance premiums are probably the largest portion of your TCOR. From a conceptual perspective, insurance premiums are your anticipated losses plus the insurer’s expenses. However, it has been shown that the biggest slice of an insurance premium is losses and the insurance industry’s perception of your losses. Perception is often stronger than reality, and in the long run: • The lower your institution’s losses and the more positive the insurance industry’s perception of your institution’s risk of losses, the lower your insurance premiums will be; and • The lower your institution’s insurance premiums, the lower your institution’s total cost of risk will be.

Thus, your institution is best served when its losses are under control and when the insurance industry sees it as having its risks under control, having strong and effective safety programs, and being able to handle any losses it does sustain in an efficient manner.

Figure 2: Total Cost of Risk (TCOR) Formula

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TCOR Impact on the Risk Management Process The widely accepted risk management cycle includes a five-step process:

Figure 3: Risk Management Cycle The first step, risk identification, is accomplished through a variety of methods, including the classification of property, human resource, liability, or net income risks. The risk manager may also use a wide variety of tools for risk identification, such as checklists, flowcharts, insurance policy analysis, personal inspections, financial report analysis, contract and policy/procedure analysis, and loss history review. The second step in the process is risk measurement. This step includes the mapping of risk into one of four areas: highfrequency/high-severity, low-frequency/high-severity, high-frequency/low-severity, and low-frequency/ low-severity. Once the risk is prioritized, the third step is to select the best technique or treatment to handle the risk, whether by avoidance, assumption of risk, transfer, or mitigation. The fourth and fifth steps that complete the cycle are implementing the technique and then monitoring the results.

A calculated cost of risk can become a catalyst in the classic risk management cycle. Each step in the traditional process of risk identification, cost measurement, selection of treatment, implementation, and monitoring of results can be affected by the resulting measurement. For example, if the cost of risk with respect to automobiles reflects an upward trend, the risk manager will be able to identify factors that are contributing to the increase, such as an increase in the number of vehicles, drivers, premium, or losses. These contributing factors can then be measured and prioritized in terms of their effect on claim frequency and severity. Once these risks are measured, techniques to mitigate or eliminate the exposures can be implemented. To complete the cycle, the cost of risk can again be calculated so that the results are monitored and the impact realized.

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The value of measuring cost of risk is twofold: most importantly, it is a valuable tool for an individual institution to trend its own costs over time, allowing it to determine whether the sum or any subset of costs is rising, shrinking, or shifting from one factor to another. For example, if one invests time and money into the prevention of employee injuries, one would expect a commensurate or accelerated decrease in the cost of workers’ compensation claims. A second value of the cost of risk measurement process is to benchmark one institution’s costs against other institutions with similar situations, sizes, structures, and missions. For instance, one may compare costs of risk of four-year liberal arts colleges in the Northeastern U.S. or land-grant Research I universities that have academic medical centers. In benchmarking one school against another, it is critical to ensure a fair comparison. Variances in risk costs can be due to factors as simple as the weather (slip-and-fall claims from icy sidewalks could impact a Massachusetts school more than one in Florida), as financially variable as the difference in Average Weekly Wage calculations for workers’ compensation benefits from one state to another, or as complex as limited tort immunity granted by one state legislature or case law versus another.

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Cost of Risk Components The cost of risk components can be categorized in three basic segments: premium, losses, and expenses.

By calculating and combining the total cost in each of these categories and then dividing by a financial measurement, a cost of risk per unit of measurement can be determined. The better you are able to develop the cost factors in these categories, the more defined your cost of risk calculation will be.

1. Premium a. Insurance Premium The most common metric used in calculating cost of risk is the expense of transferring the risk in the form of a financial vehicle, such as insurance. Premium costs, including broker fees or commissions, are the single most easily attainable expense in the equation. For organizations that are in the early stages of measuring cost of risk, it is the place to start.

Pure premium is the amount an insurance company collects to pay its losses and related expenses.

In addition, a factor is applied to the premium calculation to cover an insurer’s expenses. These expenses include the cost of personnel, risk control services, vehicles, overhead, and other business expenditures. The combined cost of losses, loss adjustment expenses, and business expenses is the developed premium.

For the purpose of using premium in the calculation of cost of risk, premium in its simplest form begins with the amount of the check written by the institution to the insurance carrier. Premium expenses, itemized by line of coverage and totaled, will provide some information. The same information measured over time may tell part of the story but does not reflect other important factors such as types and levels of coverage or retentions. For instance, a drop in premium from one year to the next may have happened not because cost of risk was reduced but because the institution has taken on a higher retention.

Institutions that have formed a captive insurance company or are members of pools, risk retention groups, or group purchasing plans should include the insurance cost to these entities as premium.

When calculating insurance premium, experience modifiers and endorsement charges or credits should be included in the period they are incurred. Conversely, audits, retrospective rating adjustments, and dividend payments should be reflected in the period they are earned.

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b. Broker Commissions / Fees Traditionally, broker commissions are paid directly by insurance companies. In these instances, the fee will be included in the insurance premium. In many cases, a broker fee is negotiated independent of the insurance premium. In either case, the commission or fee related to the negotiation, purchase, and maintenance of insurance should be separated and included in the cost of risk calculation.

Other fees that are not related to the purchase of insurance are still an important component of the institution’s cost of risk. However, those fees paid to a broker for additional risk management services, such as RMIS products, third party administration, and actuarial studies should be included as an expense rather than premium (see Expenses secSystems vs. tion below).

Individual Institutions c. Self-Insured Funds Self-insured funds are typically maintained by the institution’s administration. Transfers from appropriate sources and accounts capitalize the selfinsurance funds to an appropriate level to ensure that sufficient money is available when needed to pay losses. These funding levels and reserve analyses should be determined by an actuary or other financial professional, and the reserve should be held in separate accounts.

Fund balances in these accounts are generally not considered premium, nor should they be considered a component of the cost of risk. However, transfers to such funds for capitalization do reduce the amount of total funds available for other purposes. There is a cost associated with those lost opportunities.

When an institution has a program of self-insurance, it is responsible to pay losses and expenses up to any reinsurance attachment point. While transfers into the self-insurance fund are not included as premium, all losses paid from self-insurance funds are included within the losses category of the cost of risk calculation (see Losses section below).

If there are multiple units contributing to a self-insurance fund, such as in a university system or pooling arrangement, the individual institution would include fund contributions and only include losses within their retentions, just as if it were a commercial insurance program. Reports generated on behalf of the fund administrator would not include the income to the fund but would include the losses paid from the fund in their cost of risk calculation.

In either scenario, when there is any question as to the methodology related to any factor or metric in the calculation, it is important to provide an explanation either in the body of the report or with footnotes.

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2. Losses The sum of losses paid by the institution, directly or indirectly, should always be included in cost of risk. This includes costs, including related expenses, paid within deductible, and retention levels. It also includes those costs for losses paid under any self-insurance or self-funded programs.

Any loss within deductibles or available self-insurance funds should obviously be included. On the flip side, losses that exceed the amount of insurance limit or sub-limits within the policy should also be included. The more difficult losses to capture—those that are not insured at any level—should be included.

Large losses will be obvious, but high-frequency, low-severity losses can collectively be significant. A methodology to capture those losses will help in giving a more accurate picture of cost of risk.

An analysis should always be done to determine at what levels various retentions provide a premium break. Depending on the exposure, a subsequent or concurrent discussion should evaluate taking on higher deductibles. Assuming coverage terms, conditions, and limits are consistent with all the options, the cost of risk can and will be impacted.

Theoretically, with all other things being equal, the higher the deductible, the lower the premium.

Programs that are highly loss sensitive will have a lower cost of risk or will be able to reduce it. The key is to keep losses down to minimize the cost of risk. Heavy losses will literally send the cost of risk measurements off the charts. The cost of risk measurements will still be accurate, but they will also be uncomfortably large!

3. Expenses Several options exist when considering which operating expenses to include in the total cost of risk. Although ancillary costs, such as the cost of running Motor Vehicle Record checks (MVRs), implementing a defensive driving program, or the cost of an institution’s environmental health and safety department, could be considered, in the interest of creating a model that can be used to benchmark across comparable institutions, expenses to be included will only be those that directly affect the operation of a risk management program. Such expenses can be divided into two categories: internal and external.

Internal expenses include all costs incurred by internal sources from administering an institution’s risk management and insurance program. Expenses that should be considered include: • All employee compensation related to risk management (if necessary, use a percentage for individuals who split their time between departments) • All employee compensation related to claims handling and insurance administration • Overhead department expenses, such as office rent, utilities, office supplies, and office equipment • Travel, subscriptions, memberships, training, and training materials • In-house legal services that support risk management (contract analysis, litigation, development of waivers, etc.)

• In-house actuarial services

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External expenses include all costs incurred by outside sources in connection with an institution’s risk management and insurance program. Expenses that should be considered include: • Loss control services purchased from outside entities or broker-supplied • Risk management consultant fees • Outside legal services directly related to risk management • Outside actuarial services • Broker/insurance agent fees-for-service (not commissions, as these are already included in premiums) • Third party claims administration fees • Captive management fees

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Comparative Criteria Developing the cost per unit of an individual line of coverage, thus creating a simple fraction, or ratio, is useful when comparing cost over a period of time. Generally, the indexes used as denominators in the ratio fractions are: Type of Risk Commercial General Liability Automobile Liability Automobile Physical Damage Workers’ Compensation Umbrella Liability Professional Liability Property

Used as Denominator Revenue Number of Vehicles Number of Vehicles, or Total Value Payroll Revenue Professional Fees Property Values

Resulting Ratio per $1,000 per vehicle per vehicle or per $ per $100 per $1,000 per $1,000 ¢ per $100

Figure 4: Types of Risk and Cost of Risk Measurement Ratios The combined total of premium, losses, and expenses will provide the institution with a cost of risk by line of coverage, forming the numerator of the ratio fractions. These totals, divided by the relevant index, will provide a cost per unit to be used for comparison and benchmarking exercises.

In order to benchmark the total cost of an institution’s risk internally or against that of other institutions, various measurements may be utilized. With respect to each measurement, variance and individual interpretation must be recognized. Internally, the measurement should be consistent from year to year in order to be relevant. Externally, each organization should disclose the definition of their measurement.

Be sure to take note of what factors you included so other institutions you allow to compare against your figures will know what your numbers mean.

Total Cost of Risk: Measurement and Benchmarking Considerations •

• • •

• • •

Full-Time Employee (FTE) calculations may or may not include full-time faculty/staff, parttime faculty/staff, on-call employees, visiting faculty, adjunct faculty, student employees, and graduate students.

Square footage building measurements may be limited to assignable space rather than gross square footage.

Payroll may be defined to include over-time or bonus pay.

Operating budget or revenue figures should include tuition and fees, grants, contributions, investment return, sales and services from auxiliary enterprises, and funds released from restriction.

Enrollment may or may not include part-time students.

Research funding should include state, local, federal, private, or non-profit entity funding.

Fund allocation and whether the funds are restricted or unrestricted should be considered.

Property value should be included on an insurance replacement cost basis rather than a book or market value.

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Alternative Funding Methods For the portion of risk costs dealing with financial losses arising from claims for typically insurable events (workers’ compensation, civil liability, damage to the institution’s assets, etc.), there are many ways to fund the costs, all of which must be taken into account during the analysis. Not every institution elects to insure all these costs. It would be misleading to measure a fully-insured program with no financial consequences to the institution beyond premium payment as having “zero loss costs” and compare it to another institution’s wholly self-funded program. Even if your own risk financing structure has moved significantly towards or away from more self-insurance, you will find it both difficult and unhelpful to compare your own institution’s current data to previous years’ data.

In a fully-insured situation, the annual premium charged by the insurer considers the risk that the institution will incur claims, in addition to other services provided and the insurer’s profit. The full cost of the insurance program should be counted in weighing the cost of risk. Between fully-insured programs and wholly self-funded plans, there are a range of methods available to fund costs incurred. Some insurance products feature deductible or self-insured retentions to reduce premium and gain cash flow over time.

Other plans are “retrospectively rated,” meaning that premium is determined in a lengthy series of annual reviews after the policy has expired to account for swings in claim cost. For self-funded plans and the claims-cost portion of deductible-featured insurance policies, it is also important to measure the ultimate value of the claims—that is, the full measure of claim costs, including defense fees and final settlement.

Using only the amount paid in the year of the claim, or the initial reserve established by the claims adjuster upon receipt of the claim, short-changes the measure because claim values tend to fluctuate over time before reaching their ultimate cost, or the total cost, measured at the time the claim is closed. You must be careful to use fully-developed costs of claims for an accurate picture of your cost of risk. An actuary (or an insurer) will be able to provide the institution with loss development factors.

Although the goal is to use fully developed claim costs in the measurement of your total cost of risk, loss development factors may not be readily available to an institution. In these cases, it should still be recognized that loss reserves play an important role in providing a broad snapshot of your loss profile and should be included in the calculation. Loss reserves indicate the total estimated amount of outstanding liability for a given claim or set of claims that have occurred but the costs of which have not yet been fully paid. An actuary, third party administrator, or insurance carrier can assist you in determining loss reserves. However, if urgency in reporting is required for cost Loss reserves play of risk reports and ultimate, fully-developed claims values cannot an important role in be known with accuracy in time, a reasonable proxy would be to use what accountants might call a “cash” system (versus an “accrual” providing a broad system) of accounting. In a cash system, instead of using ultimate snapshot of your loss values as your cost of claims, you use the actual amounts expended from budget accounts to pay claims in a given year. Although you profile and should know the ultimate claims values are not included in a given year, over be included in the time the cash system of accounting for claims by “money out the door this year” will roughly equal the accrual system of waiting to include calculation. fully developed values. Basically, the claims amounts missing in one year from claims not developed are made up for by claims amounts included in that year from prior years.

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As an alternate form of insurance, some schools use captive insurance companies (owned by the institution or an affiliate or “rented” from a provider) to remove variable costs from an institutions balance sheet.

The institution pays the captive a fixed premium; in return, the captive absorbs the claim cost swings while keeping the funding in-house to maintain control and take advantage of the institution’s financial leverage. The important point is that, regardless of the mechanism used along the spectrum of insurance products, the measurement of risk cost must include all financial expenditures in support of the risk program, including insurance premium, broker fees and commissions, loss funds with claims valued at ultimate cost, claim administration expenses, and captive management expenses.

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Cost of Capital Considerations It is important to differentiate the cost of risk from the cost of insurance. For most colleges and universities, the cost of insurance is, indeed, the largest factor in the cost of risk. This is a budget-able number which usually fluctuates in manageable increments from year to year. However, in addition to the cost of regular insurance, a risk manager knows that in any given year, losses will occur. When they do, they will be a major factor in the cost of risk, either through funding of the portion of the loss retained or through potential increases in premiums. When losses occur, someone has to fund those losses. While insurance is the most common way to do so, it is important to evaluate alternative means of covering losses and methods of decreasing the cost of risk. Other than insurance, what are the main sources of funding available to institutions to cover the cost of losses?

Since not-for-profit institutions can usually borrow funds at tax-exempt rates, debt issuance or letters of credit become viable options for funding loss costs. On a property insurance program, for instance, taking a higher deductible and funding losses up to the deductible through debt issuance would create an opportunity for savings on insurance premiums. Understanding that losses will happen, this premium savings could be utilized to fund internal reserves in anticipation of that future loss and the funding of the debt payment stream (the costs of obtaining and repaying the loan principle and interest). In most instances, these reserves will be invested in assets that will realize a higher return than the interest rate associated with the debt, which creates an arbitrage opportunity. For some, captives become a method of covering one’s cost of risk in a cost-effective manner. There are also times when the most appropriate funding mechanism is simply funded reserves, or money that is set aside in an institutional account and from which losses are paid. The cost of a funded reserve is measured as the cost of the lost opportunity to do other things with the reserved funds until the time when they would be needed as a loss occurs.

Figure 5: How Insurance Creates Value by Reducing the Economic Cost of Risk

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An institution’s business office should be an integral part of your consideration of loss funding alternatives, as they will assist in determining the cost for each alternative. They can assist in determining the cost of capital, which is defined as the return necessary to make an investment worthwhile. For instance, an institution may wish to evaluate the funding of losses or use of a higher deductible through debt issuance. In this case, the institution would evaluate the expected long-term savings necessary from not purchasing the insurance versus their cost of capital, which would be the equivalent of their borrowing rate, and the probability for loss. This evaluation will determine whether or not taking insurance saves enough to maximize return. In the event of utilizing funded reserves, the cost of capital would be based upon the savings from insurance premiums versus the opportunity cost associated with other uses of those funds.

Evaluating the alternative funding of risk is an exercise that is unique to each institution. As an institution builds a cost of risk calculation and benchmarks it over time, it may appear that alternative funding mechanisms have a place in your program and are not so “alternative” after all.

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Total Cost of Risk: Part of Enterprise Risk Management Identifying and measuring an institution’s cost of risk is valuable for understanding both costs and trends and may lead to a more robust investigation of underlying factors driving certain cost components. The concept of Enterprise Risk Management (ERM) invites management to better understand their risks regardless of source and to implement strategies to minimize their impact on the institution’s mission.

Therefore, cost of risk measurement is a tool that can be used to understand the bigger picture of risk, allowing institutions to make better strategic decisions and manage risks and opportunities in the present and the future.

In Summary As stated earlier, the purpose of this paper is to provide a simple foundation of knowledge about the total cost of risk. Although the concepts and techniques presented here are intended to be broadly applicable, there are many areas yet to be explored in developing a more refined approach to the cost of risk for academic medical centers and research institutions. This paper will not be a static document, but rather a vital process that builds upon this basic foundation as Phase I. The Phase II approach will include cost of risk information specific to the academic medical center, research, life sciences, and other global operations of an institution. Additionally, the impact and measurement of catastrophic losses on total cost of risk will be addressed. The concept of enterprise risk management (ERM) will also be considered in the next phase as it aligns with the more complex operations noted above.

It is anticipated that Phase II of this cost of risk project will be ready for publication and presentation in conjunction with the URMIA Annual Conference in September 2009.

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Appendix A: Total Cost of Risk Case Study - Upper Falls University

Case Study Introduction This case study takes many of the concepts you learned about in this white paper and brings them to life. This case study should help risk managers to begin putting the concepts in this document into action on their own campuses and institutions.

As you read the case study, you will see sections of this paper and page numbers listed in gray boxes on the side of the page. If you need more information about any part of the case study or a reminder of the concepts underlying total cost of risk, you can refer back to these sections in the white paper.

Total Cost of Risk Case Study It was only 9:45 a.m. on Monday, and already it had been a long week. Joan Martinez took a moment, ignoring her ever-ringing phone, to stare out the window at the July rain falling on the campus, as it had been for many days now. As Director of Risk Management at Upper Falls University, she had already received several minor claims for losses and damage due to flooding, and the weekend downpours hadn’t improved matters. Joan sighed deeply and turned to examine the latest claim file on her desk. Suddenly, there was a sharp rap on her open door. Bob James, the University Controller and her boss, leaned in, his colorful tie dangling from a rumpled shirt collar.

“Hey there, Joan! I’m back from the business officers’ conference. How’s Upper Falls?

Say, I was wondering—could you fill me in on an idea I heard at the conference on the ‘total cost of risk’ and benchmarking? Several of my colleagues there were talking about cost of risk. I think I understand the concept—keeping track of not just the insurance premiums but other costs as well—but I was hoping to get a better handle on this….”

Joan nodded and started to reply, but Bob was off and running. “Gotta go, but maybe by the end of the week you could make up a ‘cost of risk’ report for me. Just a first draft will do—I don’t want to pay for any actuarial studies or anything like that at this point. Just leave it on my desk by Friday, and we’ll talk about it next week.” Then he was gone. His “Thanks, Joan! You’re the greatest!” floated down the hallway back through the door to her.

Joan sighed again. Total Cost of Risk (TCOR) and benchmarking were ideas she had heard about, too, but she had never done a cost of risk report. She decided she had better start on it sooner rather than later if she was supposed to have a draft by Friday. Just after I handle this claim, she told herself. I wonder—how should I start? Probably URMIA will have a good resource on this…

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An hour later, Joan put down the URMIA white paper she had downloaded and sat back in her chair. “Okay,” she said See Introduction, pages 2-4 to herself. “After reading this first part, I understand what TCOR is, who’s starting to use it, and why. I even understand that the way I’ll be using it isn’t really ‘total,’ although if I do it right the results will be helpful for me for year-over-year comparisons. I can even use TCOR data for benchmarking with other institutions. What I don’t understand—yet—is how I actually start!

What sorts of numbers go into the calculations, and where do I get that information?”

For a few moments Joan watched raindrops streaking her office window. Then she took out a legal pad and a pen and started reading again, jotting notes as she read. Less than an hour had passed when she put down her pen, picked up the phone, and called her assistant, Tony Baldwin.

See TCOR: Overview, Calculation, Impact on RM Process, and TCOR Components, pages 5-12

“Hey, Tony, I’ve got a new, high-priority project for you, so drop that thing about bicycle sharing on campus and that other thing about cell tower radiation safety. We need to list in a spreadsheet all our insurance premium costs by line of coverage for the last year.

We’re going to do some calculating of our total cost of risk. Yeah, remember that topic we discussed as a future goal for our department? Well, Bob came back from his conference all excited about this, and it looks like the future is now…”

Then she hung up and turned the page on the white paper. “I wonder how this cost of risk stuff fits in with what we’re already doing in our Risk Management Department?” she said out loud to herself, and she resumed reading.

When she came upon the section on ratios and how to calculate them, Joan fired off an instant message to Tony: “For See Comparative Criteria, that spreadsheet project, we also need the number of fleet page 13 vehicles and the number of drivers for last year. And we need whatever information we’ve got on the deductible and selfinsured retention losses we paid out. Also, I want the premiums and this other info for the previous two years as well as last year. Got all that?”

Hmm… Joan thought to herself after re-reading the section about benchmarking. I don’t think we’ll be ready very soon to try to benchmark against other institutions, but I see that we need to collect some more information for our own internal comparisons from one year to the next.

See Comparative Criteria, page 13

She sent another note to Tony, asking him to collect the number of FTE employees, info on workers’ compensation claims, and annual payroll information for last year. Tony’s response was brief: “Anything else while I’m at it?”

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“Yes, ” Joan typed. “We also need property square footage and valuation and number of FTE students. Also—total dollars of research funding, if you can find that. Oh, and the annual expense budget from the financial statements—it would be interesting to know what percentage of the total is taken up by risk. Thanks!” Tony was prickly at times, but very accurate. Joan made a note to give him another raise, if it didn’t push up the cost of risk too much.

Tony showed up an hour later with some preliminary sets of numbers. Joan read aloud to him the section on projecting fully developed claims values and the option of changing cost of risk calculations for prior years to include loss development.

See Alternative Funding Methods, page 14-15

“Wow,” said Joan. “I’m not entirely sure I understood that last paragraph, but it seems like for the cost of claims for a given See Cost of Capital year, I can use the budget numbers from accounting for what Considerations, page 16-17 I spent on the self-insured portion of our claims this year, including reimbursements to insurance companies. I’ll let the big, fancy schools worry about accruing claims numbers for this kind of report. But here, Tony, listen to this!” She read him the section on Cost of Capital considerations.

“I like that,” Tony commented, after Joan finished. “Take a big deductible, keep the premium savings and invest it, and if a loss occurs…”

“When a loss occurs,” Joan interjected.

Tony shrugged. “All right, when a loss occurs,” he continued, “you take a loan to fund the loss, with the revenue stream from the asset making the loan payments. You should be making more on the asset as an investment than you’re paying as interest on the loan.

And best of all, it’s sort of like the insurance company gave you the money to make the deal!”

“That sounds like pretty fancy financial footwork to me,” Joan said, “but I admit it seems like it would work. We’ll see what Bob says about that kind of idea. His ‘appetite for risk’ might run more toward plain vanilla insurance or maybe some cash in a loss fund, but you and I both know that risk management is becoming more complicated and more financial, so it’s good to be up to speed on these ideas. For now, though, let’s stick to the cost of risk calculations due on Friday. No matter what funding option Bob chooses, he needs to know more about how much he’ll be funding!”

Joan and Tony looked at each other. “All right,” said Joan, “We understand the why and the how. Let’s take our data and give it a try!”

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Tony showed Joan the basic figures he had hunted down for her for FY06. “I figure we can start with that year and work forward for FY07 and FY08.”

Cost of Risk Metric Total Gross Payroll* Operating Expenses Student Enrollment FTE (employees) Gross Square Footage Property Values Number of Vehicles Total Research Funding Laboratory Square Footage

FY2006 $200,000,000 $500,000,000 12,000 students 4,500 FTE 1,200,000 ft $2,000,000,000 375 vehicles $100,000,000 180,000 ft

Figure 6: FY2006 Total Cost of Risk Metrics for Case Study *NOTE REGARDING TOTAL GROSS PAYROLL: Net workers’ compensation payroll may also be used here at the institution’s discretion (rounding down some high-end salary figures and making other adjustments). Either way, the report should be both clear to the user about which numbers were used and consistent from year to year.

“These will be our ratio denominators for various ratios,” Joan said. “Good job. Now what about the cost of risk components for FY06?”

“Right here,” said Tony. “I even broke it out by insurance program for you. That was actually a bit difficult, especially for the internal expenses part,” he added, looking down at the floor modestly.

“Good stuff !” said Joan. “Let’s see what you’ve got.” (See Figure 7 on next page).

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Deductible Paid

Self-Retained Losses

•

•

Travel

Licensing/Training

Internal Legal Counsel

•

•

•

Actuarial Services

Captive Management

External Legal Counsel

•

•

• $0.00

$0.00

$3,000.00

$400.00

$1,853,000.00

$75,000.00

$18,000.00

$0.00

$12,000.00

$4,500.00

$500.00

$40,000.00

$0.00

$278,000.00

$46,000.00

$500.00

$6,500.00

$225,000.00

$1,500,000.00

$0.00

$0.00

$1,500,000.00

$0.00

WORKERS’ COMPENSATION

Figure 7: FY2006 Total Cost of Risk Components by Program

$1,567,625.00

$10,650.00

$0.00

$0.00

$0.00

$2,500.00

$150.00

$0.00

$0.00 $1,500.00

$8,000.00

$0.00

$508,550.00

Loss Control

•

$1,250.00

$2,400.00

COST BY PROGRAM

Consulting

•

$125.00

$250.00 $31,975.00

$5,600.00

$1,000.00

$68,650.00

$25,000.00

$65,000.00

$4,900.00

Third Party Administration

•

$0.00

$85,000.00 $30,000.00

$30,000.00

$125,000.00 $210,000.00

$0.00

$1,495,000.00

PROPERTY

$0.00

$225,000.00

AUTO

TOTAL

Broker Fees (PML Study)

•

EXTERNAL ADMINISTRATIVE COSTS

TOTAL

Salary

•

INTERNAL ADMINISTRATIVE COSTS

TOTAL

Self-Funded Losses

•

LOSS HISTORY

INSURANCE PREMIUM

Total Research Funding

$947,000.00

$18,750.00

$15,000.00

$0.00

$3,000.00

$0.00

$750.00

$0.00

$0.00

$78,250.00

$25,000.00

$250.00

$3,000.00

$50,000.00

$250,000.00

$0.00

$0.00

$250,000.00

$600,000.00

LIABILITY/ELL

$4,876,175.00

$109,300.00

$33,000.00

$0.00

$18,000.00

$7,400.00

$2,900.00

$40,000.00

$8,000.00

$456,875.00

$74,650.00

$1,125.00

$16,100.00

$365,000.00

$1,990,000.00

$85,000.00

$155,000.00

$1,750,000.00

$2,320,000.00

TOTAL

“As you can see,” said Tony,“this gives us a total, by program and overall, for our premiums, losses, and expenses. Here’s the number I get for our total cost of risk for FY06”: Total Cost of Risk, FY2006 $4,876,175.00 “OK, let’s play with these figures,” said Joan.“Let’s look at the See Comparative Criteria property, for instance. We have values of $2,000,000,000— Chart, page 13, and Figures is this an estimate, Tony, or is that figure as of our last ap6 and 7, pages 22-23 praisal? These are pretty round numbers. And then we have property-related premiums, losses, and costs of $1,567,625, according to your second spreadsheet. So we take all of our property-related costs and multiply that by 100 to get our costs in cents. Then we divide that number by the total property value to get the actual ‘cents per $100’ ratio I hear people talking about. In our case, I think that’s—help me with the math here, Tony— about eight cents per hundred, I think?”

Equation for TCOR Metric for Property (Total Property Premiums, Losses, and Costs) = Property Value (Total Property Value/100) (Cents per $100) Upper Falls University’s TCOR for Property in Cents per $100 ($1,567,625) = .0784, or 7.84¢ ($2,000,000,000/100) per $100 “With rounding, it’s about 7.84¢ per $100, actually,” Tony corrected, looking up from his calculator. “Is that good or bad?”

“That’s what we’re trying to find out by trending over time and benchmarking against other institutions,” Joan said. “If our programs are similar and we’re paying 8¢ while another school is paying 4¢ or 5¢, I would think we have a problem. Also, if we paid, say, 8¢/$100 last year and 10¢/$100 this year with little change in exposure, we’ll have to take a hard look at our insurers and the state of the market.”

“Now for autos,” she continued, “we have a program cost of risk of $508,550 for 375 vehicles, which works out to a per-vehicle cost of $1,356.13. I see how this works—what will be interesting will be to examine FY07 and FY08 against these numbers to see how they are trending. If we see a climbing per-vehicle cost, for instance, we should figure out what part of our premiums, losses, and other costs are driving that increase—pardon the pun!—and try to manage that risk better. We should run this on a per-driver basis, too.”

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Upper Falls University self-insured its workers’ compensation program, but Joan was interested to see the cost per $100 of payroll even without premiums. To get this figure, she sketched out the following equation: Equation for TCOR Metric for Workers’ Compensation (Total Program Premiums, Losses, and Costs) = Workers’ (Total Gross Payroll/100) Comp TCOR (Cost per $100) Upper Falls University’s TCOR for Workers’ Compensation in Cost per $100 ($1,853,000) = 0.926, or 93¢ per ($200,000,000/100) $100 She and Tony worked through several other metrics together.

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Upper Falls University Program Area

Total per Program Area, FY2006

TOTAL COST OF RISK, FY2006

$4,876,175.00

TOTAL PAYROLL

$200,000,000.00

TOTAL OPERATING EXPENSES

$500,000,000.00

NUMBER OF FULL-TIME STUDENTS

12,000 students

NUMBER OF FULL-TIME EMPLOYEES

4,500 FTEs

GROSS SQUARE FOOTAGE

1,200,000 ft

RESEARCH FUNDING

$100,000,000.00

LABORATORY SQUARE FOOTAGE

180,000 ft

Figure 8: Totals per Upper Falls University Program Area, FY2006 Institutional Measure

Upper Falls University FY2006 Cost of Risk Calculations

Per $100 of Total Payroll = Total Cost of Risk (Total Payroll/100)

$2.44 per $100

Per $1,000 of Operating Expenses = Total Cost of Risk (Total Operating Expenses or FY Budget/1,000)

$9.75 per $1,000

Per Full-Time Student = Total Cost of Risk # of Full-Time Students

$406.35 per student

Per FTE (Full-Time Employee) = Total Cost of Risk # of Full-Time Employees

$1,083.59 per FTE

Per Square Foot = Total Cost of Risk Gross Square Footage

$4.06 per square foot

Per $100 of Research Funding = Total Cost of Risk (Research Funding/100)

$4.88 per $100

Per Laboratory Square Foot = Total Cost of Risk Laboratory Square Footage

$27.09 per square foot

(Total Payroll = $200,000,000.00)

(Operating Expenses = $500,000,000.00)

(Number of Full-Time Students = 12,000)

(Number of Full-Time Employees = 4,500)

(Gross Square Footage = 1,200,000)

(Research Funding = $100,000,000.00)

(Laboratory Square Footage = 180,000)

Figure 9: Institutional Measures - Cost of Risk for Upper Falls University’s Risk Management Program, FY2006 “Hey! Nice to see our overall cost of risk is less than 1% of the institutional operating budget!” exclaimed Tony.

“Yes, but that’s only a good thing if it’s near the benchmark of other schools, or if it is tracking well internally over time,” noted Joan, “which brings me to your next assignment.”

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Tony nodded. “You’ll be wanting these calculations for FY07 and FY08 also. I’ll get right on that. Maybe I can come up with a couple of trending graphs that track these costs over time, too.”

“That would be great,” said Joan. “We need to start keeping all these metrics for each year—it will be a lot easier to add a new column every year than to start from scratch like we did this time. I can think of several other metrics and graphs I’d like to see, once we get up and running. I’ll start working on the narrative part of the report. It will be interesting to hear what Bob James thinks of all this. For instance, what if he decides to start billing back the gross square footage cost of risk to departments who control space, at least for the property program portions? I wonder if somebody will be giving up a corner office to save costs?!”

“If so—dibs!” shouted Tony as he headed out the door.

“Would you take a salary cut for it? Gotta keep the administrative cost of risk down!”

Joan called after him, but she knew Tony was doing good work. Joan made a mental note to give him a bonus—and she hoped Bob would do the same for her.

As she reached to pick up her ringing phone, she glanced out the window. The rain had stopped, and a warm sun was breaking through the clouds at last.

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28 0% 0%

0% 0%

12,000 4,500 1,200,000 $2,000,000,000 375 180,000 $100,000,000 $4,876,175

STUDENT ENROLLMENT

FULL-TIME EMPLOYEES

GROSS SQUARE FOOTAGE PROPERTY VALUES

VEHICLES

LABORATORY SQUARE FOOTAGE RESEARCH FUNDING

TOTAL COST OF RISK

$5,266,269

$125,000,000

200,000

400

$2,500,000,000

1,500,000

5,000

13,000

$750,000,000

$300,000,000

FY2007

8%

25%

11%

7%

25%

25%

11%

8%

50%

50%

% INCREASE OVER FY2006

$5,687,570

$150,000,000

210,000

425

$3,000,000,000

1,700,000

5,500

14,000

$900,000,000

$400,000,000

FY2008

Figure B-1: Total Cost of Risk Data by Program Area for Upper Falls University and Percentage Change from Baseline Values, FY2006-FY2008

0%

0%

0%

0%

0%

$500,000,000

OPERATING EXPENSES

0%

% INCREASE OVER FY2006

$200,000,000

FY2006

TOTAL GROSS PAYROLL

PROGRAM AREA

17%

50%

17%

13%

50%

42%

22%

17%

80%

100%

% INCREASE OVER FY2006

The following graphs show how Upper Falls University (see Appendix A: Case Study) might choose to display its total cost of risk data to stakeholders. The figure below shows Upper Falls’ data from FY2006 to FY2008. This data will be used in the graphs in this section.

Appendix B: Sample Displays of Total Cost of Risk Data

$12.00 $10.00

Total Cost of Risk per $1,000 of Operating Expenses $9.75

$8.00

$7.02 $6.32

$6.00 $4.00 $2.00 $0 FY 2006

FY 2007

FY 2008

Figure B-2: Changes in TCOR per $1,000 of Operating Expenses, FY2006-FY2008

Total Cost of Risk per $100 of Property Values $3.00 $2.50

$0.244 $0.211 $0.190

$2.00 $1.50 $1.00 $0.50 $0 FY 2006

FY 2007

FY 2008

Figure B-3: Changes in TCOR per $100 of Property Values, FY2006-FY2008

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Total Cost of Risk Compared to Exposure Metrics Percentage Change over Baseline Year (FY2006) 100% 90% Operating Expenses, 80%

80% 70% 60% 50%

Property Values, 50%

40% 30% FTE (employees), 22% Total Cost of Risk, 17% Vehicles, 13%

20% 10% 0% FY 2006

FY 2007

FY 2008

Figure B-4: Percentage Change in TCOR by Exposure Metric, FY2006-FY2008

Total Cost of Risk by Program LIABILITY/ELL, 19% PROPERTY, 32%

AUTO, 10%

WORKERS' COMP, 39%

Figure B-5: TCOR by Program as a Percentage of the Whole, FY2006

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Appendix C: Glossary Actuary

A professional statistician who can assist with assessing levels of risk (likelihood and severity).

Captive A wholly-owned insurance subsidiary of an institution that insures all or part of the risks of its parent.

Cost of Capital The return necessary to make an investment worthwhile. Sometimes also called the “hurdle rate” or the “internal rate of return.” The cost of setting aside monies in a funded reserve instead of seeking alternate methods of financing risk.

Deductible The amount the insured will pay for a covered loss prior to the insurance company issuing payment.

Efficient Risk Frontier The point in an exposure to risk where the balance between risks taken and risks transferred is optimized, and where an organization can afford to pay the costs of risks not transferred.

Enterprise Risk Management Management of any issue that affects an institution’s ability to meet its objectives.

Funded Reserve Monies actually set aside by management to cover anticipated future losses (not just an empty account tagged for losses—that would be an “unfunded reserve”); depending on the institution’s cost of capital, may be cheaper way of funding losses than insurance or other alternatives Group Purchasing Plan A group purchase plan is designed to realize economies of scale associated with leveraging the total insurance expenditures of a group. Consolidation of premium into one carrier, and the restructuring of risk assumptions given the increased dollar volume, allow members to realize savings.

Insurance Pool An association of institutions who share premium, losses and expenses in order to spread risk.

Loss Reserve At a point in time, the total estimated amount of outstanding liability for a given claim or set of claims that have occurred but the costs of which have not yet been fully paid. Also includes estimated costs for claims that have been “incurred but not reported” (IBNR).

Operating Expense The annual cost associated with the activities necessary to deliver the university’s services. In general this will include personnel expense, operations and maintenance, capitalized equipment, and debt service.

Opportunity Cost Premium

The cost, including the loss of revenue or increased expense, of foregoing one alternative in order to pursue an alternate action.

Money paid by contract in exchange for promised coverage defined in an insurance policy, bond, letter of credit, etc.

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Retrospective Rating

Risk Management Cycle Risk Retention Group Self-Insurance Program Self-Insurance Funds Third Party Administrator Total Cost of Risk

Ultimate Claim Cost

An experience-based rating program whereby a provisional premium is charged at the beginning of the plan, followed by a series of annual audits after the policy has expir ed to account for losses and determine the final premium.

A five-step process of 1) risk identification, 2) analysis, 3) technique selection, 4) implementation and 5) monitoring.

A corporation or limited liability association that is owned by its members and spreads risk and results among the members.

A program whereby the institution retains all or a portion of a risk.

A calculated amount of money set aside to compensate for losses retained under a self insurance program.

An organization retained by an institution to administer and manage its claims retained under self insurance programs.

All costs borne by a university or college due to the possibility of risk.

These costs are typically illustrative of a point in time that can be used to create an institution’s own benchmark comparison.

The total amount of money paid for a claim over time, determined at the time of the final closure of the claim.

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Appendix D: Additional Resources Ackley, Sheri, et al. 2007. URMIA White Paper: ERM in Higher Education.

Bloomington, Indiana: University Risk Management and Insurance Association.

Cassidy, Dale, Larry Goldstein, Sandra L. Johnson, John A. Mattie, and James E. Morley, Jr. 2001.

Developing a Strategy to Manage Enterprisewide Risk in Higher Education. National Association of College and University Business Officers (NACUBO) and Pricewaterhouse Coopers LLP: 4.

Marsh, Inc. 2004. An Executive’s Guide to Risk Management and Total Cost of Risk.

Risk Alert: A Report for Clients and Colleagues of Marsh on Risk-Related Topics III(4).

Risk and Insurance Management Society, Inc. (RIMS). 2008. RIMS Benchmark Survey Results Book. New York: RIMS. United Educators. Spring 2008. Reason & Risk 16(1).

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URMIA Home Office P.O. Box 1027 Bloomington, IN 47402 www.urmia.org