Getting ready to market your public entity for property and casualty insurance coverage can be a challenging and lengthy process filled with a multitude of questions, forms and risk reviews. Basically, your entity has three options to consider when it comes to finding property and casualty coverages; you can access coverage through a self-funded risk pool, pure self-insurance or a traditional, yet specialized, insurance carrier.
In a risk pool, public entities combine their buying power to purchase coverage. Because a pool spreads risk among its members, it’s important to pay close attention to the pool limits, terms, conditions and financial strength as well as determine if the coverage is adequate for your overall exposure. Other equally important considerations are the concept of golden handcuffs, such as any provisions for claims-paid when exploring other options and future assessments, either during the terms of coverage or even years later.
Self-insurance is an alternative option, but typically reserved for much larger entities that enjoy a significant budget and resources to carry their own risk. This is a complicated option as the entity is responsible for setting aside the appropriate amount of reserves to finance unforeseen losses in both past and future years, as well as managing all aspects of the claim process.
Accessing an insurance carrier is a popular option for local governments. Admitted insurance carriers are regulated and required to maintain a financial position which is independently reviewed by rating agencies. A carrier’s financial position is a reflection of the carrier’s claims paying abilities. As such, generally an insurance carrier will have established a greater financial position than a pool and contractually assume the responsibility of risk from the public entity. When evaluating different carriers, a public entity may consider the carrier’s A.M. Best financial strength rating, longevity in the market and whether the carrier is admitted or non-admitted in a specific state. Additionally, find out if the carrier specializes exclusively in public entity coverage rather than being a generalist in their insurance product offerings. It is important the carrier understand a public entity’s wide range of exposures, unique coverage needs and high value of assets. As with any partner or option, ensure those resources are available to you, in the form of dedicated and knowledgeable underwriting, claims and risk control personnel.
If you choose to go to market, here are the documents you should be prepared to provide:
- Current loss runs for at least the past three but preferably five years. If you can supply loss runs for the last 8-10 years, it may help with your pricing.
- Accurate property schedules with appropriate valuations. Although not required, appraisals are helpful and will benefit you to ensure adequate and appropriate coverage. And don’t overlook what could end up being millions of dollars in forgotten utilities such as electrical equipment, pumps, etc.
- If you’re securing an auto policy, you’ll need an auto schedule with vehicles tracked by department.
When you receive your quote, pay close attention to what’s being proposed. Don’t just look at the bottom line price. Although it’s vital to stay within your budget, you may want to consider a weighted grading scale where consideration such as claims handling and risk control services are considered. Sometimes justifying a higher premium for more robust coverage and services offered is worth the conversation with your stakeholders.