Consideration of Insurance Renewal: Workers’ Compensation for fiscal year 2014.

Approval of the insurance renewal proposal will authorize staff to secure workers compensation insurance for the July 1, 2013 to June 30, 2014 policy year.

Premium will be paid from the City’s self-insured trust (SIT) fund from account number 600 8901 590 2304.  The renewal premium includes a 20% discount factor off of manual rates and the annual premium is projected to be $1,098,527.  An initial deposit of $180 is required.  Then, premiums are paid quarterly when actual payrolls for each quarter are reported to the insurer.

11. Effective governance
Purchase of insurance will provide funding to pay for employee injuries without disruption to the City’s budget.

No.

Accept the proposal from SCF Western.
Reject the proposal  - Note no other insurance markets are available.  This would require filing a request to self insure with the Industrial Commission of Arizona and expose the City to the cost of work injuries as well as workers’ compensation claims adjusting. 

The City of Flagstaff has been insured with SCF since 2002 with regular explorations of other markets conducted by our broker Willis.This year, although other insurance companies were approached by our broker; no other markets provided quotes on our workers’ compensation insurance.Travelers indicated that they would be in the realm of $1.6 million for this line of insurance, but did not complete their quote.  SCF Arizona is a direct writer with whom the City interacts directly with no commission due to an agent.

State statute requires workers compensation benefits be provided to employees.
Past loss history including large losses from a significant auto accident in 2009 as well as frequency of claims with higher loss ratios has created upward pricing pressure on this line of insurance

No other insurance markets were interested in quoting workers' compensation on a solo basis, nor was Travelers Insurance competitively motivated to add it to our package policy with them.  Travelers indicated a premium of 1,685,000 which is over $586,000  higher than our renewal quote from SCF Western of $1,098,527.  Workers' compensation is historically a difficult market in which to find competitive insurers.  This is compounded by our loss history which includes a significant auto related accident in 2009 and loss frequency with above average loss ratios in the last few years. 

Purchase of insurance will provide funding to pay for covered losses without disruption to the City’s budget.

Not applicable.

None.

06/18/2013 - EAB - Approved