10.
City Council Work Session (Amended)
- Meeting Date:
- 05/12/2020
- From:
- Dean Coughenour, Director of Risk Management
TITLE
Self Insurance of Workers' Compensation and Insurance Renewals
STAFF RECOMMENDED ACTION:
Council will receive a presentation to consider two alternatives for our insurance renewals that staff seeks direction from Council on.
Staff recommends: City Council renew our Airport liability, flood and travel policies with existing carriers for $25,061.
- City Council accept the proposal submitted by the Arizona Municipal Risk Retention Pool in the amount of $1,018,337 and the proposal for Workers’ Compensation in the amount of $749,738 for a total of $1,768,075.
- City Council accept the proposal submitted by Travelers Insurance with Liberty Mutual providing property coverage, in the amount of $872,678 and a proposal for our Workers’ Compensation coverage with Travelers Insurance in the amount of $710,032 for a total cost of $1,582,710.
Staff recommends: City Council renew our Airport liability, flood and travel policies with existing carriers for $25,061.
EXECUTIVE SUMMARY:
The City of Flagstaff today expends $1,490,601 to insure all our insurance exposures with AIG for our property, Travelers Insurance for Liability and Auto and Copperpoint Mutual for our Workers’ Compensation program. Council will receive a presentation on the merits of both the Arizona Municipal Risk Retention Pool and Travelers Insurance with Liberty Mutual for the property to meet the insurance needs for the City of Flagstaff for the next fiscal period.
INFORMATION:
During the first two months of this year our Property Insurance carrier indicated that they would not renew our property insurance due to losses. Specifically, the roof replacement for council chambers.
The City was in the process of marketing all lines of coverage except Workers’ Compensation and had anticipated an increase in pricing for our property insurance at renewal.
A second major issue arose late last year with the introduction of SB 1160 or firefighter cancer presumption bill. This bill would, if passed as currently drafted, remove the requirement that the firefighter show exposure to a known carcinogen, as well as the provision that allows the presumption to be rebutted by showing a specific cause of the cancer other than an occupational exposure to a carcinogen. Any of the cancers identified in the statute would simply be covered.
In a marketing meeting in December, staff was assured that because of our loss control measures and favorable loss history that this was not going to be an issue for the City of Flagstaff. On February 13th, our Workers’ Compensation carrier, reached out to inform staff that they would not renew any risk that contained the class code 7710 “firefighter” in the State of Arizona. That meant that, as of July 1st, 2020, the City of Flagstaff would be without coverage for our Workers’ Compensation program.
This left two options. 1. Self-insure our Workers’ Compensation with the unknown impact of the yet to be passed Firefighter Cancer presumption law, or 2. to secure an insurance carrier willing to write our coverage in light of the new law (if passed as written).
The City aggressively marketed to every available carrier for both deductible and first dollar coverage to quote our Workers’ Compensation coverage. All declined with most citing SB1160 as the reason. Two agreed to quote. Travelers Insurance, our current carrier for Liability and auto, and the Arizona Municipal Risk Retention Pool, (A.M.R.R.P.). Both agreed to quote the Workers’ Compensation coverage under the condition that they write the entire package including all or nearly all lines of coverage and neither would quote the Workers’ Compensation as a stand-alone policy. Put simply, we had three options: Travelers, AMRRP or self-insurance.
Today we pay $515,150 annually to fully insure our Workers’ Compensation program.
Self Insurance: Actuarial studies were conducted that indicated we would need between $1,163,000 and $1,563,000 to pay claims in 20/21 with the cancer presumption law to self-insure. Because of these significant numbers staff is not recommending self-insurance as a viable option at this time until the uncertainty of the impact of the new cancer presumption law has been more fully developed.
Travelers Insurance quoted $710,032 and AMRRP quoted $749,738, with a $5,000 deductible. This represents a 35 to 45 % increase over current premium.
The Risk Management department in concert with our broker conducted an extensive review of the two all inclusive quotes.
Council will receive a presentation on the merits of each including staffs recommended changes in deductibles and self-insured retentions levels.
The City was in the process of marketing all lines of coverage except Workers’ Compensation and had anticipated an increase in pricing for our property insurance at renewal.
A second major issue arose late last year with the introduction of SB 1160 or firefighter cancer presumption bill. This bill would, if passed as currently drafted, remove the requirement that the firefighter show exposure to a known carcinogen, as well as the provision that allows the presumption to be rebutted by showing a specific cause of the cancer other than an occupational exposure to a carcinogen. Any of the cancers identified in the statute would simply be covered.
In a marketing meeting in December, staff was assured that because of our loss control measures and favorable loss history that this was not going to be an issue for the City of Flagstaff. On February 13th, our Workers’ Compensation carrier, reached out to inform staff that they would not renew any risk that contained the class code 7710 “firefighter” in the State of Arizona. That meant that, as of July 1st, 2020, the City of Flagstaff would be without coverage for our Workers’ Compensation program.
This left two options. 1. Self-insure our Workers’ Compensation with the unknown impact of the yet to be passed Firefighter Cancer presumption law, or 2. to secure an insurance carrier willing to write our coverage in light of the new law (if passed as written).
The City aggressively marketed to every available carrier for both deductible and first dollar coverage to quote our Workers’ Compensation coverage. All declined with most citing SB1160 as the reason. Two agreed to quote. Travelers Insurance, our current carrier for Liability and auto, and the Arizona Municipal Risk Retention Pool, (A.M.R.R.P.). Both agreed to quote the Workers’ Compensation coverage under the condition that they write the entire package including all or nearly all lines of coverage and neither would quote the Workers’ Compensation as a stand-alone policy. Put simply, we had three options: Travelers, AMRRP or self-insurance.
Today we pay $515,150 annually to fully insure our Workers’ Compensation program.
Self Insurance: Actuarial studies were conducted that indicated we would need between $1,163,000 and $1,563,000 to pay claims in 20/21 with the cancer presumption law to self-insure. Because of these significant numbers staff is not recommending self-insurance as a viable option at this time until the uncertainty of the impact of the new cancer presumption law has been more fully developed.
Travelers Insurance quoted $710,032 and AMRRP quoted $749,738, with a $5,000 deductible. This represents a 35 to 45 % increase over current premium.
The Risk Management department in concert with our broker conducted an extensive review of the two all inclusive quotes.
Council will receive a presentation on the merits of each including staffs recommended changes in deductibles and self-insured retentions levels.