Agenda Packets - 2003/08/25 (2) - Laserfiche WebLink

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Item No: 9F Meeting Date: August 25, 2003 Type of Business: Council Business City of Mounds View Staff Report To: Honorable Mayor and City Council From: Charles Hansen, Finance Director Item Title/Subject: Resolution 6081 Authorizing Insurance Policies for the Year July 2003 through June 2004 For many years, virtually all of the insurance policies have been purchased from the League of Minnesota Cities Insurance Trust (LMCIT). The LMCIT tailors its policies specifically to meet the needs of member cities and offers the most competitive premiums since the policyholders own it. The City of Mounds View purchases insurance policies as a means of transferring risk to another entity. Some risk is retained by the City by means of deductibles on the insurance polices. The insurance policies continue the $10,000 deductible on the property and liability policies and $5,000 deductible on the worker’s compensation policy that have been in effect on previous policies. Larger deductibles save the City money on average over a period of years. This is because the increased premiums needed to purchase insurance policies with low deductibles will more than cancel out the losses the City pays in deductibles. Attached is a bound document that summarizes the City of Mounds View’s insurance coverage. Page 25 presents a comparison of this year’s premiums to last year’s. Total property/liability premiums (the SUBTOTAL line) are up 22.8%. Worker’s compensation premiums are up 22.3%. The LMCIT has base rates for its policies that are the starting point for all Minnesota Cities. These are applied to risk factors such as expenditures, property values, and payrolls. The resulting base premiums are then adjusted by experience modifiers. Experience modifiers are the average of three years of paid claims and expenses for the city. Each year, the oldest year in the average drops off and is replaced by the most recent complete year of claims. For this policy renewal, the year being added is July 2001 through June 2002. This is a year in which there were numerous liability and property claims and a worker’s compensation claim with extensive lost work time. Basically, we are going from a situation where Mounds View’s experience modifier was better than the average for Minnesota cities and reduced our premiums to one where Mounds View’s experience modifier is worse than average and raises our premiums.