By Laura Jungmichel
When it comes to protecting your public entity’s assets and your employees (and since most public entities do not have the resources to be self-insured), typically there have only been 2 coverage options.
The first is purchasing coverage through a governmental pool. The second is purchasing coverage through a commercial insurance carrier that specializes in public risk.
As I have listened to public entity leaders at our convention booths at the Tennessee School Boards Association and at TnPRIMA and in recent personal meetings and appointments over the past several months, I believe we are entering a time of great change when more and more public entities will choose to be insured by a commercial insurance carrier rather than by a governmental pool.
The most common reasons that people were sharing with me regarding their openness to commercial insurance seemed to center around 4 key issues.
The first issue is Performance. Whether it’s from dropping the ball on a claim or from a lack of regular communication or from a sense of just feeling taken for granted, people evaluate their insurance carrier’s performance on a regular basis. It matters not whether it’s a governmental pool or a commercial insurance carrier, as public entity leaders, you have the right to expect timely communication, consistent and reliable service, and explanations and approval regarding any issues that arise from a claim.
As I have reviewed workers compensation loss runs from several governmental pools recently, I am amazed when I see claims sitting there for five or six or seven years with no activity but with very large reserves that never seem to find any resolution. How your carrier adjusts your claims goes a long way in determining what price you pay for your workers compensation premium as well as potentially contributing to a culture among employees that the carrier will just pay the claims, not really adjust them. This is just one reason among many why carrier Performance is so very important.
The second great concern people are talking about is Price. If your public entity did not go out to bid last year, you probably saw an increase in what your public entity paid in premium to your governmental pool for coverage. Several people with whom I have met recently saw increases ranging from $25,000 to over $200,000 last year. Unfortunately, they did not go out to bid.
Now several public entity leaders have commented that they are being told by their governmental pool that if they go out for bid this year that they will not receive their 2% discount for paying early. I really don’t feel a need to comment about this tactic other than to say, “Hmmmm, let’s see, potentially save 10-15% over your current premium by going out to bid or……. save a whopping 2% for paying early after your premium increase. Now which would any thinking person choose?”
The third area of concern is Transparency. It’s impossible to fairly evaluate your carrier options for public entity insurance if a bidding governmental pool does not fully disclose all of their coverage exclusions in their quotation. This lack of complete disclosure and transparency can cause some serious issues when a significant loss occurs.
If you want to read about how one school district was “told that a previously unknown provision in their insurance policy” would affect their property claim, and the subsequent issues, then click here.
There are other transparency issues with governmental pools that I could discuss such as loaning member premium dollars to other organizations without member knowledge, lack of full disclosure regarding fees and amounts of contracts paid to vendors, never going out to bid for third party TPA and vendor contracts, non-disclosure of salaries, bonuses, and total compensation packages, etc, etc, etc.. You get the idea. Transparency regarding your actual coverage and exclusions, as well as how your governmental pool operates and spends your taxpayer funded premium dollars without member knowledge, is for many a mounting concern.
The last area is regarding Partnership. One of the most important services we seek to provide to our insured clients is to communicate that they have a genuine partner who cares about them and who will work with them in managing their public entity insurance coverage responsibility. In other words, we want you to know that you and your public entity are not alone in the great responsibility of managing your public entity’s insurance needs.
In summary, these four issues seem to be the hot buttons people are talking about this year and why it appears to me that public entity leaders are seriously looking at commercial carrier insurance as their new coverage solution.
If you would like to speak with us regarding any of your public entity’s insurance needs or if you have any other questions, feel free to call our office at 615-369-0646.