Agenda - Council - 08/27/1985 - Laserfiche WebLink

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rmuiny uuveracye tougner for public entities: Panel By MEG FLETCHER SAN DIEGO— Public entities' special handicaps can put liability insur- ance out of their reach when commercial insurance is difficult to buys Consequently, public entities must work harder to grab the insurance that is available. That was the assessment offered by three panelists who spoke last month at the sixth annual Public Risk & Insurance Management Assn. confer- ence. The conference was called "The Turning Tide," a reference to changing conditions in the commercial marketplace. - Public entities are handicapped by two characterisitics, according to Mi- chael P. Vaughan - Fowler, a London -based director of the North American Division of•bcoker J.H. Minet Co. Ltd.: - : . : - � • They have high visibility, which results in an attitude of entitlement by plaintiffs and high claims frequency. • Public entities often seek competitive bids from insurers, even in a sellers' market. This makes them unattractive to insurers, especially those in London that attach a great deal of importance to loyalty. The bidding problem is compounded further when public entities send out several brokers seeking the same coverages. ' Then, a single insurer may receive duplicate submissions from different brokers. It is better to choose one broker that has access to all markets, Mr. Vaughan - Fowler explained. "It is incongruous to have insurance purchased on the same basis as paper clips," he quipped. Municipalities should not be surprised by big premium increases, ad- vised a consultant. "Frankly, a 100 %" increase should be considered a major coup by a risk manager," according to H. Felix Kloman, principal and associate director of the consulting firm Tillinghast Nelson & Warren. Mr. Kloman is based in Darien, Conn. One town that Mr. Kloman declined to name was quoted a premium 1,069% higher than last year's— $695,000 compared with $65,000 —for $1 million in liability insurance in excess of a $150,000 self- insured retention, he said. Following the discussion, Mr. Kloman said he is still continuing to work to find coverage for that town, which had a problem with inadequate loss information. "Dramatically" higher premiums is only one of several characteristics of what Mr. Kloman termed the "anti- market" of 1985. Other characteristics include: fewer insurers, dwindling underwriting capacity, increased underwriting selectivity, higher retentions by policy- holders and policy restrictions and modifications. A major factor in the tighter market conditions is the reduction of rein- surance available to primary insurers, noted James G. Smith, vp of broker Johnson & Higgins in its Houston office. He said he expects "constant" and "steep" price increases for the next two years. He also predicts that, as of Jan. 1, there will not be any sudden and accidental pollution coverage available. Coverage for police will be avail- able primarily on a claims -made basis, unless there are major tort changes, and there will be almost no coverage for prior acts under a claims -made form. In this marketplace, public entity risk managers must work harder, the panelists advised. The panelists recommended short -term strategies of: improving risk as- sessment and data collection, developing better contacts with underwriters by personalizing submissions, educating governing boards and finance committees, considering collective purchasing, funding higher retention levels and revising agent /broker remuneration to a fee rather than com- mission basis. ■