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INSURANCE RENEWAL PROCESS. Objectives. Overview of insurance program. Insurance issues. Insurance marketplace. Council direction on insurance renewal process. Tom Davies Square Pioneer Manor Sudbury Airport Water, Wastewater and other Public Works operations Ontario Works

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insurance renewal process
INSURANCE RENEWAL PROCESS

Insurance Renewal Process August 12, 2003 1

objectives
Objectives
  • Overview of insurance program.
  • Insurance issues.
  • Insurance marketplace.
  • Council direction on insurance renewal process.

Insurance Renewal Process August 12, 2003 2

background
Tom Davies Square

Pioneer Manor

Sudbury Airport

Water, Wastewater and other Public Works operations

Ontario Works

Economic Development partnerships

Transit Services

Background

As the largest municipality in Northern Ontario serving a population of 155,000 the City has assets and provides services usual to a community-minded municipality, including, but not limited to:

Insurance Renewal Process August 12, 2003 3

background1
Background
  • Sports facilities, Citizen & Leisure Service Centres
  • Police, Fire and Emergency Medical Services
  • Greater Sudbury Metro Board
  • Greater Sudbury Community Development Corporation
  • Greater Sudbury Housing Corporation
  • Leased and owned buildings, furnishings, computer and other equipment with values in excess of $660,000,000

Insurance Renewal Process August 12, 2003 4

background2
Background
  • Construction and maintenance of streets and sidewalks;
  • Water and wastewater treatment and distribution;
  • Solid waste disposal;
  • Construction, operation and maintenance of recreation facilities;
  • Recreation and leisure programming;
  • Long-term care facility;
  • Public housing;
  • Building plans examination and inspection;

Insurance Renewal Process August 12, 2003 5

insurance program
Municipal General Liability

Errors & Omissions Liability

Health Care Professional Liability

Non-Owned Automobile

Legal Expense Reimbursement

Excess Liability

Umbrella Liability

Conflict of Interest

Automobile

Garage Automobile

Insurance Program

The City has various insurance coverages:

Core municipal coverage

Insurance Renewal Process August 12, 2003 6

insurance program1
Environmental Liability

Property Insurance

Boiler & Machinery

Crime Insurance

Councilors’ Accident

Firefighters’ Accident

Additional coverage

Aviation Liability

Aviation Excess Liability

Airport Environmental Liability

Workers Compensation Stop-Loss

Ontario Works Program

Community Affiliates

User Groups

Insurance Program

Insurance Renewal Process August 12, 2003 7

insurance market
Insurance Market
  • Insurance industry has gone through some very difficult times of late.
  • Poor underwriting practices, tremendous loss of equity in world stock markets and catastrophic losses in Europe and the USA.
  • Over the last 24 months the insurance capacity (or the ability to write insurance business) has shrunk.

Insurance Renewal Process August 12, 2003 8

insurance market1
Insurance Market
  • The number of companies willing to write municipal insurance has been reduced.
  • Insurance companies have changed their business practices and have become more risk averse and more diligent when they write insurance.
  • Many insurers no longer provide coverage for certain risks, or now limit their coverage.

Insurance Renewal Process August 12, 2003 9

insurance market2
Insurance Market
  • Some providers are not pursuing municipal accounts.
  • Some programs have been restricted in terms of coverage.
  • Some programs are geared to smaller rural municipal accounts.
  • Some programs cannot provide a competitive product (current market share of Ontario Municipal accounts is very small).
  • Some programs are having difficulty maintaining consistent insurance carriers.

Insurance Renewal Process August 12, 2003 10

reciprocal insurance
Reciprocal Insurance
  • A reciprocal is not a conventional insurer but rather a reciprocal insurance exchange.
  • A reciprocal is a group of municipalities that have come together to spread their risks and losses by charging an amount against each member to cover losses that occur in the group.

Insurance Renewal Process August 12, 2003 11

reciprocal insurance1
Reciprocal Insurance
  • The decision to join a reciprocal should not be viewed as an insurance alternative or solution.
  • It is a major philosophical change.
  • Joining a reciprocal insurance should be a conscious long-term commitment.

Insurance Renewal Process August 12, 2003 12

reciprocal insurance2
Reciprocal Insurance
  • As a member of a reciprocal, you assume a certain percentage of the entire group’s liabilities and losses for the period of time that you were a member.
  • Reciprocal has the ability to re-assess each member for excess claim losses.
  • On the other hand, surpluses may be divided amongst members.

Insurance Renewal Process August 12, 2003 13

reciprocal insurance3
Reciprocal Insurance
  • A reciprocal in theory has a major advantage over conventional insurance if two conditions hold true:1) Insurance premiums are either too expensive or it is difficult to find proper insurance coverage.2) There is a large homogeneous group of municipalities with similar exposures.

Insurance Renewal Process August 12, 2003 14

reciprocal insurance4
Reciprocal Insurance
  • A reciprocal would self insure the first million dollars and re-insure limits in excess through the conventional insurance marketplace.
  • With all the problems currently in the insurance industry, a reciprocal faces many of the same problems that conventional insurers do.

Insurance Renewal Process August 12, 2003 15

reciprocal insurance5
Reciprocal Insurance
  • Upon joining a reciprocal there are obligations to report claims in a manner that will protect the interest of all other members.
  • The member authorizes the work of adjusters, outside consultants, makes payments, and assists with the negotiation of settlements.
  • Members must submit all claim liabilities and financial reports to the reciprocal members and track claims activity and reserves for anticipated payments on a quarterly basis.

Insurance Renewal Process August 12, 2003 16

reciprocal insurance6
Reciprocal Insurance
  • Much of this work can be undertaken by a duly appointed adjuster who is given proper authority and a trust account to handle claims and reporting which would increase adjusting cost significantly.
  • The alternative is handle claims in-house which would require significant additional staff resources.
  • Reciprocal members would have substantial staff resources. Greater Sudbury has only one individual dedicated to insurance and risk management.

Insurance Renewal Process August 12, 2003 17

renewal process
Renewal Process
  • Changes in insurance practices dictate changes in our business practices.
  • In 2000, the Transition Board insurance program tender process linked the broker and insurer together.
  • To guarantee a competitive insurance program that meets our requirements the broker should be separated from the insurer.

Insurance Renewal Process August 12, 2003 18

renewal process1
Renewal Process
  • This practice will ensure that the broker will be acting in our best interests and will be providing independent advice.
  • Best to receive advice from a broker before the insurance program tendering process.
  • Best practice would dictate that requests for proposal for the insurer and for the broker not be concurrent.

Insurance Renewal Process August 12, 2003 19

renewal process2
Renewal Process
  • Claims adjustment is critical to properly managing our insurance costs.
  • The claims adjuster must act on our behalf and in our best interests.
  • Best practice would dictate that requests for proposals for claims adjustment be issued concurrent with that for the broker to ensure impartiality of both the broker and the adjuster.

Insurance Renewal Process August 12, 2003 20

renewal process3
Renewal Process
  • These two service providers will have an excellent opportunity to acquaint themselves with and become knowledgeable about the insurance risks and insurance requirements of the City.
  • By extension then, they will be able to provide excellent advice to ensure a suitable selection of and smooth transition to another insurer if so awarded.

Insurance Renewal Process August 12, 2003 21

renewal options
Renewal Options

Option# 1 Best PreferredExtend the present broker services agreement for a two-year period ending December 31, 2005.Extend the present claims adjustment services agreement for a one-year period ending December 31, 2004.Extend the present insurance program for a one-year term to January 1, 2005.

Insurance Renewal Process August 12, 2003 22

renewal options1
Renewal Options

Reasons why:

By extending the insurance program for another year, the insurance industry will have the opportunity to regroup and insurance costs may settle.Future renewals (by tender) can be set for staggered terms so that tenders are not issued concurrently and not in an election year.

Insurance Renewal Process August 12, 2003 23

renewal options2
Renewal Options

Reasons why (continued):

Broker services are not linked to a particular insurance company but rather the broker consultant becomes a key resource to the City acting in our best interests.Council has the opportunity to renew the insurance program and the agreements for broker services and claims adjustment before “lame duck” provisions take effect.

Insurance Renewal Process August 12, 2003 24

renewal options3
Renewal Options

Option# 2

Next Best Preferred Issue a Request for Proposal for broker services for a two-year period to December 31, 2005.

Extend the present insurance program for a one-year term to January 1, 2005.

Extend the present claims adjustment services agreement for a one-year period ending December 31, 2004.

Insurance Renewal Process August 12, 2003 25

renewal options4
Renewal Options

Reasons why:By extending the insurance program for another year, the insurance industry will have the opportunity to regroup and insurance costs may settle.Future renewals can be set for staggered terms so that tenders are not issued concurrently and not in an election year.

Insurance Renewal Process August 12, 2003 26

renewal options5
Renewal Options

Reasons why (continued):

Broker services are not linked to a particular insurance company but rather the broker consultant becomes a key resource to the City acting in our best interests.This would mean that the “new” Council would, at its first sitting in December 2003, have to decide and award the broker consultant.

Insurance Renewal Process August 12, 2003 27

renewal options6
Renewal Options

Option# 3 Not preferredIssue a Request for Proposal for the insurance program for a one-year term to January 1, 2005.Extend the present broker services agreement for a one-year period ending December 31, 2004.Extend the present claims adjustment services agreement for a two-year period ending December 31, 2005.

Insurance Renewal Process August 12, 2003 28

renewal options7
Renewal Options

Reasons why not recommended:In the current “hard” market competition for municipal insurance business has lessened which will limit the number of submissions.Broker resources would not be available to assist with the evaluation of insurance program submissions.

Insurance Renewal Process August 12, 2003 29

renewal options8
Renewal Options

Reasons why not (continued):Renewals for both the insurance program and broker services next year would occur concurrently.The insurance industry does not quote renewals much more than 60 days before policy expiration dates. This would mean that the “new” Council would, at its first sitting in December 2003, have to decide the insurance program.

Insurance Renewal Process August 12, 2003 30

renewal options9
Renewal Options

Option# 4 Least Preferred Issue a Request for Proposal for the insurance program for a one-year term ending January 1, 2005.Issue a Request for Proposal for broker services for a three-year period ending December 31, 2006.

Issue a Request for Proposal for claims adjustment services for a two-year period ending December 31, 2005.

Insurance Renewal Process August 12, 2003 31

renewal options10
Renewal Options

Reasons why not recommended:In the current “hard” market competition for municipal insurance business has lessened which will limit the number of submissions.Broker resources would not be available to assist with the evaluation of insurance program submissions.

Insurance Renewal Process August 12, 2003 32

renewal options11
Renewal Options

Reasons why not (continued):This would mean that the “new” Council would, at its first sitting in December 2003, have to decide the insurance program, the broker consultant and the claims adjuster.

Insurance Renewal Process August 12, 2003 33

insurance renewal process council resolution
Insurance Renewal ProcessCouncil Resolution

THAT the Treasurer be authorized to negotiate with Canada BrokerLink for the broker services agreement to be extended for a two-year period ending December 31, 2005; and

THAT the Treasurer be authorized to negotiate with SCS Insurance Adjusters Ltd. for the claims adjustment agreement to be extended for a one– year period ending December 31, 2004: and

THAT the insurance coverage presently provided by Frank Cowan Company Limited be renewed for a further one-year term to January 1, 2005.

Insurance Renewal Process August 12, 2003 34