|Mr. Mark Lenz, Bearence Management Group, the City's insurance agent, has presented a quotation for the property and liability policy, which includes a $50,000 deductible up to an aggregate of $200,000 as in previous policies. The annual premium savings, by utilizing the $50,000 deductible rather than a $1,000 deductible, will be roughly $256,000. The City paid approximately $140,000 in property and liability losses in 2017 plus approximately $69,150 in net losses for physical damage to City owned vehicles. The City does not cover vehicles for physical damage given the high deductible. If the City were to consider a lower deductible of $25,000 with a $100,000 aggregate, the premium would increase roughly $133,000. If the City had a $25,000 deductible in 2017, the City would have saved $38,000 in deductible costs, but this would not have justified paying the higher premium. The City did settle two claims in 2017 for more than $25,000, a water main break causing damage to an apartment building as well as a police liability claim.
Property/Automobile Rates The property premium increased by 6.3 percent even though rates stayed the same. Coon Rapids is insuring $131.8 million in buildings/contents/PIO compared to $127.3 million in the prior year. Values increased for buildings about three percent and a new locations were added including the completion of Sand Creek and Boulevard Plaza parks which is considered Property in the Open (PIO). According to the City's insurance agent, PIO carries a higher risk factor resulting in a higher premium/dollar ratio than buildings/contents.
For automobiles, the City currently covers 201 vehicles compared to 195 in the prior year. However, the premium actually went down due to the LMCIT method for rating vehicles. The LMCIT determined that police vehicles were undercharged in the past and fire vehicles overcharged. The new methodology resulted in a premium decrease for the City since police vehicles are not insured for physical damage. The number of vehicles is dependent on how quickly older vehicles are deleted from the fleet. The City has opted to only insure vehicles for liability, not physical damage. This does not include heavy equipment such as dump trucks and fire trucks which do carry physical damage/collision coverage dependent on overall value.
Liability Premium The LMCIT's liability rating system is designed to be simple, do a good job of allocating premium costs to members, and uses just five key factors: number of households, sewer connections, city employees, police officers and overall city expenditures. This rating system is used to rate municipal liability and auto liability premiums. Experience shows that these categories consistently accounted for most of the LMCIT's liability loss costs, about 79% of the total. Land use, measured by number of homes, accounted for 21%, police about 26%, employment claims about 16% and sewer backup 16%. Everything else was about 21%. That category includes claims related to water and other utilities, parks and recreation, licensing, airports, etc. The LMCIT did change the liability rate within each category somewhat. However, what impacted premiums most, was the increase in the experience factor based on the City's past claim history.
The experience rating factor is based on six categories of losses: police, land use, employment, sewer backups, automobile and all other. Actual losses are compared to expected losses in cities with comparable numbers over the past three years. For the 2017-18 renewal, the experience modification factor increased from .835 to .895. When less than one, the rating represents a discount from the standard premium. This year's premium is based on 2014, 2015 and 2016 losses. Police liability claims impacted th City's experience modification factor negatively for this policy year. The smaller the factor, the better. Unfortunately the discount decreased about six percent translating to an increase of six percent in premium increase.
Legal Limit Statutory limits are $500,000 per claimant and $1.5 million per occurrence. The City has the option to waive these limits, allowing the LMCIT to pay claims in excess of the statutory limit. Waiving the limit does increase the premium. Staff recommends the City not to waive the statutory limit. The additional cost to adding another $1,000,000 in coverage would be $78,028.
No Fault Sewer Back-up Coverage The City carried this coverage from 2002 through 2010 but declined in 2011 and 2012. The City Council did request that the City carry the insurance starting again in 2013-14 at a cost of $15,340. The cost for 2018 for similar insurance would cost $16,863. No fault sewer back-up coverage would supplement a homeowner's personal insurance up to $10,000 per sewer back-up claim no matter who is at fault. Without the added coverage, the City's insurance would only cover the claim if it were determined to be the City's negligence that caused the back-up. In 2017, the City paid two claims under the sewer no fault coverage amounting to $11,437.