As nonprofits seek to diversify their revenue streams and reach new audiences, they need to communicate their missions and value propositions more broadly, persuasively, and efficiently than ever before, and they’re embracing digital media to do so.
According to statistics cited by Changing Our World, a nonprofit fundraising consultancy, over $22 billion was raised online in 2011, making online giving the fastest-growing fundraising channel for nonprofits. But no significant advance comes without risk — and digital philanthropy is no exception.
There are several exposures inherent in digital fundraising, few of which are properly addressed by traditional insurance:
• Many organizations have vibrant websites with rich downloadable content and blogs, among other forms of media including links to Facebook, Twitter and LinkedIn.
• Electronic solicitations are subject to certain statutes, including the CAN-SPAM Act governing advertising and solicitation email.
• The rapid march toward online giving involves transmission and retention of sensitive information. Even if nonprofits engage e-clearinghouses to handle such traffic, they bear exposure for data breaches, whether or not the data is in their direct custody or control.
From an insurance standpoint, commercial general liability insurance isn’t the remedy some imagine. Underwriters have introduced new and broader exclusions for non-advertising publishing, electronic bulletin boards and chat rooms, and violations of statutes that prohibit unsolicited advertising faxes or unsolicited emails. Traditional personal injury coverage for invasion of right of privacy may not extend to data breaches, especially since policy language has historically been framed around “oral or written publication” as the underlying offense.
Textbook strategies including risk avoidance, reduction, and transfer are appropriate to fundraising, just as to many other activities. Generally, an effective corporate risk management plan will combine elements of all of these strategies.
Despite the best-laid plans and risk management, accidents do happen. Depending on the nature and breadth of their development initiatives, nonprofits should consider specialized protection:
• Multimedia liability insurance: Protects the organization and its individual actors against civil liability for offenses including libel, slander, defamation, and invasion of right of privacy arising through media-related activities (online, video, broadcast, publishing), as well as intellectual property matters such as plagiarism and trademark/copyright infringement.
• Network security & privacy liability insurance: Protects the organization’s IT network and digital assets against damage by human error or criminal acts, and insures against civil liability for damage to others’ networks and digital assets and unauthorized release of private information, regulatory fines and penalties, and data breach response costs. Cyber liability is the most significant emerging threat to any business today, with stringent consumer protection laws magnifying the exposure in some 46 states.
Healthcare and human service providers subject to HIPAA privacy and security rules may be especially vulnerable, as is any organization engaged in e-commerce (e.g., online donations or merchandising). The Ponemon Institute’s most recent benchmarking study on patient privacy and data security reports an average data breach cost of $2.4 million, with 94 percent of respondents having suffered at least one breach in the past two years.
Nonprofit organizations recognize that development is their lifeline in a post-recession era against the backdrop of new government spending cuts.
Every new dollar counts — and no organization can afford to have its hard-earned revenue bleed out through unexpected, uninsured losses.
Scott R. Konrad is a senior vice president at HUB International Northeast, a division of HUB International Limited, a top 10 global insurance brokerage and risk advisory firm. Konrad resides in Essex.
