County approves $334,000 insurance contract

Nov. 29--After nearly an hour of discussion, the Reno County Commission voted Tuesday to stay with the county's current insurance provider, despite concerns that losses the company may suffer from this year's hurricanes could result in a significant price spike in 2019.

The county received proposals for property and liability insurance coverage from Hutchinson-based Fee Insurance Group, representing Travelers Insurance Company, as well as two government pool insurers -- KCAMP, the Kansas County Association's Multiline Pool, and Midwest Public Risk (MPR), a pool for public entities in Missouri and Kansas.

Travelers Insurance has been the county's insurer for the past six years.

The bid it submitted to continue coverage next year, however, slashed its price more than $28,700 or nearly 8 percent from rates the county is paying now, to $334,318.

KCAMP, which the county relied on for insurance for many years before going with Travelers, offered a bid more than $29,000 higher than Travelers, though it was only about $400 higher than what the county is paying for coverage this year.

MPR's bid of just under $358,000 was some $23,600 higher than Travelers, and about $5,500 lower than KCAMP's.

"Comperable coverage"

All three are good insurers and would provide comparable coverage for the county, insurance consultant James Charlesworth, of Charlesworth and Associates, advised the commission.

"Each program has its own unique qualities and characteristics," he said, noting risk pools operate differently than traditional insurance.

"Both KCAMP and Midwest are trusts, and members share a portion of the risk," he said. "Individual members have deductibles, and the pool covers the difference between the deductible and re-insurance. A lot of the insurance pools started in the mid-80 and early 90's, and it's an effective risk transfer solution for a lot of reasons."

Besides risk transfer, pools specialize in offering services on top of claims, such as specialized training to lessen claims, particularly in law enforcement and public works. Depending on how much training the county took advantage of, it could reduce its insurance rates through the form of rebates.

"With that said, we are suggesting you consider Traveler renewal," Charlesworth said.

He also suggested the county look at adding two coverage options, one increasing the liability cap on claims involving law enforcement from $1 million to $2 million for an additional $6,177, and buying a comprehensive deductible plan for an extra $472.

While there is a $500,000 cap on liability claims against municipalities in Kansas, most lawsuits end up in federal court, Charlesworth said, where there is no cap.

With regular deductibles, the county would pay the first $500 to $1,000 for each vehicle loss. With the comprehensive deductible, if there were a hailstorm that wiped out a whole parking lot of vehicle, for example, the county's deductible would cap at $10,000.

"If that happens, I look like a hero," Charlesworth said. "If not, you spent an extra $472."

A representative of KCAMP was present at Tuesday's meeting and came close to swaying the commission on its vote by pointing out a three-year guarantee on rate increases.

Officials from the other two companies were not at the meeting.

Rate stability debated

David Luke, administrator and CEO for KCAMP, noted his agency's bid included a lock-in of a maximum 2 percent increase in rates for the second and third years of the contract if county claims remained below 65 percent of the county's limit, or 5 percent if they went over.

The policy also offered a number of rebates for such things as training or quarterly safety meetings.

"If Travelers dropped their pricing, that's good for you, but the commercial game is rates going up and down," Luke said. "We try to give the best pricing and keep it stable with our 3-year rate stabilization."

The rate stabilization offer was not included in the 12 pages of side-by-side comparison of the three bids, prompting Commission Chairman Dan Deming, after its mention, to poll his fellow commissioners and the county administrator on whether that would influence their decision.

The county has $60,000 in losses so far this year, easily qualifying for the cap, Luke noted, and large losses from "acts of God" are also not included in determining the ratio.

"That seems to me fairly attractive and causes me to look harder at KCAMP," Deming said.

"It's been a soft cycle for 10 years, and insurance companies are looking for excuses to raise rates," Charlesworth told the board. "I've started hearing rumblings the hurricanes will drive up rates. KCAMP is not affected by hurricanes, and I heard Travelers had considerable losses in the Houston area. How that will resonate through the country, I don't know."

Commissioner Bob Bush, however, said he felt the county should take advantage of the substantial drop in premiums Travelers was offering and if rates shot up, the county could simply go out for bids again.

"The rate stabilization we have is the open market, because companies want to be competitive," Bush said. "To me, that is not a driving factor... If we see a $40,000 increase by them trying to claw back the $20,000 cut, I don't think we need to tie our hands. Our responsibility is to go with the best product we see today for the county, and that would be Fee Insurance."

Commissioner Ron Hirst pointed out, even if Travelers hiked it rates 5 percent that would still be $11,000 less than the county would pay with just a 2 percent hike by KCAMP.

In the end, the board voted unanimously to stay with Travelers Insurance.

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