INSURANCE RENEWAL
PROCESS
Insurance Renewal Process
August 12, 2003
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Objectives
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Overview of insurance program.
 Insurance issues.
 Insurance marketplace.
 Council direction on insurance renewal
process.
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August 12, 2003
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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:
 Tom Davies Square
 Pioneer Manor
 Sudbury Airport
 Water, Wastewater and other Public Works
operations
 Ontario Works
 Economic Development partnerships
 Transit Services
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August 12, 2003
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Background
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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
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August 12, 2003
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Background
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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;
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August 12, 2003
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Insurance Program
The City has various insurance coverages:
Core municipal coverage
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Municipal General
Liability
 Errors & Omissions
Liability
 Health Care
Professional Liability
 Non-Owned
Automobile
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Legal Expense
Reimbursement
Excess Liability
Umbrella Liability
Conflict of Interest
Automobile
Garage Automobile
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August 12, 2003
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Insurance Program
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Environmental
Liability
Property Insurance
Boiler & Machinery
Crime Insurance
Councilors’ Accident
Firefighters’ Accident
Additional coverage
 Aviation Liability
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Aviation Excess
Liability
Airport Environmental
Liability
Workers
Compensation StopLoss
Ontario Works
Program
Community Affiliates
User Groups
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August 12, 2003
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Insurance Market
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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.
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August 12, 2003
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Insurance Market
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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.
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August 12, 2003
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Insurance Market
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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.
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August 12, 2003
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Reciprocal Insurance
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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.
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August 12, 2003
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Reciprocal Insurance
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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.
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August 12, 2003
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Reciprocal Insurance
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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.
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August 12, 2003
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Reciprocal Insurance
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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.
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August 12, 2003
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Reciprocal Insurance
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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.
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August 12, 2003
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Reciprocal Insurance
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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.
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August 12, 2003
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Reciprocal Insurance
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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.
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August 12, 2003
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Renewal Process
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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.
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August 12, 2003
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Renewal Process
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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.
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August 12, 2003
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Renewal Process
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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.
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August 12, 2003
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Renewal Process
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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.
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August 12, 2003
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Renewal Options
Option# 1 Best Preferred
Extend 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 oneyear term to January 1, 2005.
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August 12, 2003
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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.
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August 12, 2003
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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.
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August 12, 2003
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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 oneyear term to January 1, 2005.
Extend the present claims adjustment services
agreement for a one-year period ending December
31, 2004.
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August 12, 2003
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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.
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August 12, 2003
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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.
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August 12, 2003
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Renewal Options
Option# 3 Not preferred
Issue 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.
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August 12, 2003
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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.
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August 12, 2003
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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.
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August 12, 2003
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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.
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August 12, 2003
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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.
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August 12, 2003
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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.
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August 12, 2003
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Insurance Renewal Process
Council 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.
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August 12, 2003
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