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Home My WebLink About5G 2013 Insurance Policy Renewals o� P �O�P ti � U t:y 4646 Dakota Street SE `�fNNES�� Prior Lake, MN 55372 CITY COUNCIL AGENDA REPORT MEETING DATE: MAY 28, 2013 AGENDA #: 5G PREPARED BY: JERILYN ERICKSON, FINANCE DIRECTOR PRESENTED BY: JERILYN ERICKSON AGENDA ITEM CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING THE 2013 INSURANCE POLICY RENEWALS DISCUSSION: Introduction The purpose of this agenda item is to consider approval of the 2013 insurance policy renewal with the League of Minnesota Cities Insurance Trust. Historv The City of Prior Lake participates in the League of Minnesota Cities Insurance Trust (LMCIT) for the purpose of securing its liability, property, casualty, automobile, volunteer and workers compensation insurance coverage. Current Circumstances The City has been insured by the LMCIT since 1987. The LMCIT is a self- insurance pool of cities formed to meet cities' coverage and risk management needs. They currently service over 90% of Minnesota cities. The LMCIT also provides a prorated dividend when claims for their long- time members are favorable and the members are successful in avoiding and controlling losses. This practice is unusual in the insurance industry. During 2011, the LMCIT provided the City a$53,052 dividend on the general insurance coverage and a$20,299 dividend on the workers compensation insurance coverage. Several years ago, Staff determined that it would be appropriate to have the Council approve the insurance policies since the total premiums exceed the $20,000 threshold which the City Manager is authorized to approve. This approval is being requested on an annual basis. City staff requested an extension for filing the general liability and property renewal application for 2013 due to other staff and time commitments. The period covered by the renewal is 02/01/2013 — 02/01/2014. ISSUES: Years ago, before the LMCIT offered insurance; cities found that in some years they could purchase insurance at reasonable costs. In other years, one or two companies would insure municipalities and the costs increased as a consequence. The coverage included in the City policy is municipal liability, property, automobile, open meeting law, public employee faithful performance required by State Statutes. The City has historically carried a $10,000/$20,000/$1,000 deductible amount for liability coverage. For 2011, the City Council approved increasing the aggregate deductible amount to $40,000. The 2013 policy maintains a$40,000 deductible. The LMCIT also provides workers compensation insurance coverage for the City. 2013 and 2012 Insurance premium comparisons are shown below: (nsuran�e � �f1�12 ,,,.. � _=,�.�0#3 f $ � � 4 10 '�� T � E r� ��fiat�° e � , �ha� e '�� Property & $221,467 $217,796 Casualt , Etc. Less: ($15,503) $0 Commission" Net Property & $205,964 $217,796 $11,832 5.7% Casualt Premium Workers Compensation Premium $148,331 $149,898 $1,567 1.1% "Starting in 2013, the City pays a $9, 000/year fixed fee for insurance agent of record services versus a commission based on the premium. Total cost for property & casualty insurance for 2012 was $221,467 as compared to $226,796 ($217,796 +$9,000 fee) in 2013 which is an approximate 2.4% increase. It should be noted that the insurance agent also provides services related to the workers compensation insurance, as well, which has not been the case in prior years. Northern Capital Insurance Group prepared the following summary of the primary drivers of the renewal premium change: Property/Casualty Premium Rates, Effective November 15, 2012 • Property rates decreased 2 percent. • Liability rates decreased 3 percent (except higher premiums for most cities with Police Departments). • Auto Physical Damage rates decreased 7 percent. • Auto Liability rates decreased 3 percent (except Police vehicles, which increased). • All other rates were unchanged. • A new liability rating system used to allocate liability and auto premium costs more equitably among members based on the most costly loss exposure hazards, including: Land Use Litigation (# households), Police Liability (# officers), Sewer Backup (# connections), Employment Claims (# employees). The new rating system will tend to shift premium costs somewhat toward members that have police departments. 2 Property Replacement Cost Inflation Factor, Effective November 15, 2012 • Buildings +2.0% • Personal Property (Contents) +2.7% • Mobile Property +3.3% • Property In Open +2.0% City of Prior Lake Property/Casualty Renewal Factors • Property Addition: Vacant House/Shed — additional $2,814 premium. • Property Addition: Lift Stations w/ $4,540,030 replacement cost — additional $1,489 premium. • Property: Buildings, Contents, Property In Open Replacement Cost Values from $55,635,390 to $65,620,526 (including lift stations). • Municipal/Auto Liability Experience Rating Modifier decreased slightly from 0.915 to 0.906 (9.4% credit). • Automobile: truck physical damage replacement cost valuations were updated FINANCIAL The 2013 budget (all funds) includes approximately $217,000 for general IMPACT: liability, property, automobile and bond insurance. Based on the current quotes, the City would exceed the budget by approximately $1,000. The 2013 budget (all funds) includes approximately $169,000 for workers compensation insurance. Based on the current quote, the City would realize budget savings of approximately $19,000 across all funds. ALTERNATIVES: 1. Approval of the resolution authorizing the 2013 insurance policy renewals. 2. Deny this agenda item for a specific reason and provide staff with direction. 3. Table this item to a certain date in the future. RECOMMENDED Alternative #1. MOTION: 3 O � PRIp � � 4646 Dakota Street SE �''INxESO'��` Prior Lake, MN 55372 RESOLUTION 13-xxx A RESOLUTION AUTHORIZING THE 2013 INSURANCE POLICY RENEWALS Motion By: Second By: WHEREAS, The City of Prior Lake participates in the League of Minnesota Cities Insurance Trust (LMCIT) for the purpose of securing its liability, property, casualty, automobile, employee faithful performance (bond), open meeting law defense and workers compensation insurance coverage; and WHEREAS, The insurance renewal period is 02/01/2013 through 02101/2014; and WHEREAS, The insurance includes a$10,000/$40,000/$1,000 deductible amount for liability coverage; and NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein. 2. The City Council hereby approves the 2013 insurance policy renewals at a premium cost of $217,796 for property and casualty and $149,898 for workers compensation. PASSED AND ADOPTED THIS 28th DAY OF MAY 2013. YES NO Hedber Hedber Keene Keene McGuire McGuire Morton Morton Souku Souku Frank Boyles, City Manager