The recent sexual abuse allegations surrounding Pennsylvania State University have sparked concerns amongst insurers regarding risk. While most of the attention regarding the situation has been aimed on those responsible, insurers have been considering what to do to account for the risk and liability that seems to be inseparable with state universities. Moody’s Investor Services Inc., a ratings agency based in New York, has said that the damage to the university’s reputation may take years to repair. The agency has said that it is considering lowering Penn State’s bond rating, which will prompt insurers to raise coverage rates.
Penn State is not the first university to be embroiled in scandal and is unlikely to be the last. Insurers have been dealing with liability for these institutions for years and have, thus far, taken the issue on a case by case basis. With Penn State’s scandal, however, insurers are becoming increasingly convinced of the unavoidable and inherent risk found in such universities. Risk managers working with universities, such as Christine Eick with Alabama’s Auburn University, say that more attention should be paid to areas in which universities work with children.
How the Penn State scandal will play out is unclear, but it will likely send ripples through the world of education, especially where insurance is concerned. With insurers growing more leery of alleged sex scandals, universities may soon face steeper insurance prices to account for risk.