INSURING LIBRARIES FOR LESS
Obsolescence now a factor in calculating premiums
By Colleen MacPherson
If a university library burned to the ground, it is unlikely the institution would, or could, go out and buy a new copy of every book and every document. So why then would universities pay premiums to insure resources that would not be replaced?
This question was tackled recently by the Canadian Universities Reciprocal Insurance Exchange (CURIE), a collective of 50 Canadian institutions, including the U of S, that was set up in 1988 to insure its members. The organization looked at what percentage of library assets would actually be replaced in the event of a catastrophic loss, and how to factor obsolescence into the formula for calculating premiums. For the U of S, the results meant a saving of $51,079 on its property insurance premium for 2005.
Nowell Seaman, risk management and insurance services manager, said obsolescence has always been an issue with library claims. He went on to explain that obsolete resources are outdated materials that would be replaced by newer material, or available via new technology like the Internet. Irreplaceable materials, on the other hard, would be items like out-of-print books that are no longer available.
And generally, materials associated with science, technology and medicine have a higher obsolescence rate than those relating to the social sciences and humanities.
“There are things in a library you simply can’t get again. If you travelled the world over, you might be able to find another copy but that’s just not feasible to do. You also have to ask if it’s always practical to replace a particular journal all the way back to the first issue if the entire series is available in electronic form. Or, if you lose 100 volumes, it might only be practical to replace 50 or 60 of them. The question CURIE was faced with was how much of a loss actually gets replaced.”
To answer that question, CURIE selected five libraries from among its members and, along with local library staff, did a detailed study of what would be replaced and what wouldn’t. Seaman said the two main findings of the study were that obsolescence “is a very significant issue” in university libraries, and that estimates of obsolescence “are relatively consistent from university to university”.
“We’re very satisfied with the results. They verify our own experience in the smaller losses we’ve had over the years.”
The study results were used to create a computer model that was applied to all CURIE members to determine premiums, he said, which is no small consideration given the values involved. In 2003, libraries accounted for 33.7 per cent of CURIE members’ assets. At the U of S, the library collection in all locations is valued at $685 million for 2005, just over one-quarter of the University’s total property value of $2.49 billion. For that amount of insurance, the University paid a premium of $621,000 for the year, with a $50,000 deductible.
“Insurers base their premiums on insuring assets to full replacement value so we’ve been reporting every book but in practice, we’re not going to replace every book. One of the great values of being a member of CURIE is that they will fund a study of this nature for the benefit of all members because there is no way we could do this on our own.”
Seaman said CURIE offered its members two options on renewal in January – insuring their collections to full replacement value with a higher premium, or agreeing to have the CURIE obsolescence factor applied to claims of over $5 million with the benefit of lower premiums. After consultations with library staff, Seaman said it seemed “prudent to take option B. We have to address it (obsolescence) in any event so why not take the lower premium. Besides, it’s nice to find a way to save some money on insurance premiums.”