UW-Whitewater University Handbook
Last policy revision: 10/10/02
Insurance and Risk Management Policies
SOURCE: Office of the Vice Chancellor for Administrative Affairs
Preservation of University assets is a major responsibility of all University
departments. Departments are custodians of the property which the University
has entrusted to them. Departments must, therefore, manage those risks
which could destroy or deplete their assets. However, before these risks
can be controlled, they must be recognized.
What is Risk Management?
Risk Management is the acceptance of responsibility for recognizing, measuring,
and controlling the exposures to loss which are created by the activities
of the University. By contrast, insurance management involves responsibility
for only those risks which are actually insured against.
Some definitions are in order:
Risk is uncertainty of loss. Peril is a source of loss (fire, windstorm,
embezzlement, etc.) Hazard is a condition which increases the likelihood
of loss (e.g., a known embezzler hired as a bookkeeper).
With these definitions in mind, we can now delineate the principles
of Risk Management as they apply to the University. However, because of
the diversification within the University, it is difficult to establish
procedures which will fit all situations equally. For instance, some departments
operate entirely on University owned property, while others carry out many
of their operations in the field and their exposure to loss varies greatly.
All departments are exposed to the perils of fire, burglary, automobile
accidents, and liability for injury on the premises. Some of these departments
also have exposures in the area of malpractice, destruction of property
on loan to the University, and the destruction of highly sophisticated
equipment through negligence.
Therefore, an intelligent approach to Risk Management and insurance
is necessary. Insurance is not purchased out of desire, but out of necessity.
It is not a commodity which is enjoyed or displayed or sought after by
its owner. It is one of the few things which is bought with the hope that
it will never have to be used.
University departments should not leave these things to chance, but
should follow established procedures to control the risks.
The purpose of the following information is to alert University departments
to the nature of their risk, and to provide at least the basic pattern
for management to follow in the study of these risks.
RISK MANAGEMENT AND SAFETY
A function of Risk Management and Safety is to organize and carry out a
plan to control the risks to which the University is exposed. Departments
can find qualified help in the University Police and Security Department
or in Risk Management and Saftety. With this assistance, they can follow
certain procedures to control risks adequately and to obtain an objective
loss prevention program. These steps are:
The main concern of most departments in the risk of property. This term
embraces all possible loss arising out of either destruction, confiscation,
or loss of use of University property, or in many cases, personal assets.
Recognize and appraise the risk.
Estimate the probability of loss due to the risk.
Select the optimum method of treating the risk.
Implement a plan to carry out the selected method.
Loss by Destruction -- Property may be destroyed by fire, flood, wind,
Loss by Confiscation -- Property may be confiscated by an act of crime
such as theft, embezzlement, robbery, burglary, holdup, forgery and conversion.
Loss of Use -- When property is destroyed or confiscated, the loss is often
increased because of the indirect loss resulting therefrom. Loss of rents,
interest, and additional expense incurred are all indirect losses. Much
greater than the loss to physical property, is the loss to records and
data which were accumulated over a number of years.
METHODS FOR TREATING RISK
There are established and tested techniques by which property exposures
may be controlled.
Avoiding Risk. A risk may be avoided by not accepting or entering
into the event which contains the exposure. For example: If a rental contract
calls for the University to be responsible for all occurrences in the space,
when the University uses only part of the space, the clause can be deleted
or rejected in its entirety. This method has severe limitations because
such a choice is not always possible, or if possible it may require giving
up some important additional advantages. Nevertheless, in a large number
of situations risk avoidance is both possible and desirable.
Spreading Risk. It is possible to spread the risk of loss to both
money and property. Duplication of records and documents; and then storing
the duplicate copies elsewhere is an example of spreading the risk. Too
many times a small fire in the file room has wiped out the entire records
of departments' operations.
Loss Prevention or Reduction of Risk. "An ounce of prevention is
worth a pound of cure," according to an old saying. Today this statement
provides the guide for the control of risk. Risk may be reduced, eliminated,
or certainly controlled by using a well-planned loss prevention program.
These are some of the points all departments should consider in their
efforts to reduce loss:
Utilization of the University Police and Security and Risk Management and
Better physical protection of money and records through the use of high
quality safes, vaults, and filing cabinets. If they are available, they
substantially reduce the possibility of destruction or confiscation by
illegal means. When facilities are available for the storage of money or
valuable equipment, access should be limited to as few people as possible.
Cash handling procedures are controlled by statute. At least once a week
any cash that is in the office must be deposited in the University Cashier's
office. Safekeeping arrangements should be made for any other valuable
In requesting a site for storing valuable property, a number of items should
be reviewed to reduce the possibility of loss. They include:
High water level. Avoid basements, gulleys and areas where flood history
Heating system. Steam can, over a long period, be more damaging than water.
Exposure. Surrounding area should be checked for hazardous exposures such
as storage or use of gas, oil and chemicals.
Housekeeping. Preventive Maintenance: Probably no hazard has resulted in
causing more accidents than poor housekeeping. Good housekeeping procedures
include, but are not limited to:
There are basically two approaches to loss prevention:
Reporting poor workmanship of custodial personnel to proper supervisor.
Asking for assistance in preventive maintenance of equipment, tools, and
Controlling neatness and traffic flow patterns internally.
The engineering approach emphasizes mechanical causes of accidents, such
as defective wiring, improper disposal of waste products and unguarded
machinery. The consideration of engineering as an essential part of any
loss prevention and reduction program. Yet, many times neglect or just
plain carelessness by University employees is the major cause of personal
injuries and property damage.
Engineering risks; and
Personnel administration or human relations.
Worker's Compensation and Health Insurance Programs were implemented
to act as a cushion to the financial loss that may result from an accident
There is no way completely to compensate for the pain, suffering, dismemberment,
or disfigurement that may result. Looking for ways to prevent injuries
is the key.
Retention, Assumption or Acceptance of Risk. These methods must
be of particular interest to an operation as large as the University. Which
risks should be retained by the University? Too many risks are accepted
unintentionally through unawareness of the exposure. Many risks have to
be retained because there is no other choice. Example: Hazards due to the
acts of nature. Today, with the many new concepts of insurance, it is possible
to insure against almost any risk except war and taxes if one is willing
and able to pay the premium. It is not, however, always economical to do
Therefore, some risks are retained, assumed, or accepted. Examples of
these types of risk are: glass breakage and theft of University-owned property.
The importance and economic value of risk is periodically reviewed in relationship
to the size of the operation. The probability and potential amount of loss
is also considered.
Transfer of Risk to Insurance Carrier or Others. Risk may be transferred
contractually. The Senior Vice President for Administration, UW-System
has the authority and responsibility to sign certain insurance contracts
for the University of Wisconsin System. Other insurance contracts to be
entered into by the University should first be reviewed by the System Risk
Management. No contractual risks should be transferred to the University
unless there is adequate knowledge of them. This means local campus review
is necessary through the Risk Management and Safety Office. Many risks
can and should be transferred to an insurance company. By doing so, that
part of the risk is reduced to a certainty--the amount of the premium.
||Web Development Team-UW Whitewater
For comments: firstname.lastname@example.org.
Last Web revision on October 10,
2002 by rlr.