Agenda Packets - 1984/10/22 - Laserfiche WebLink

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THE COOPERATIVE HOME INSURANCE PROGRAM (CHIP) Section 1— Introduction -- A Private Sector homeowner's insurance program which has revenue -producing potential for nearly every I city in the U.S. is now operating, for the first time anywhere, in Calk ,rr ia. Vernon Hazen then of Mill Valley and. later, Alan Parker, of Seal Beach, were the first managers to sizcned in securing their councils' appro- vals for this probably revolutionary and certainly controversial cooperative program. Since Mill Valley's venture_ into this arena, in Febwary of 1982. Ine program has been expanded and modi- fied. There is a new marketing concept and a new city entry plan option. The AVCO Financial Insurance Group (which supported the early development of the CHIP) is now prepared to expand the program nationally. This new, more broadly workable progrr.m appears to greatly enhance the prospects of early application nationwide. CHIP policies are now available for most kinds of owner -occupied dwellings including 14 family structures and mobile homes (when Mill Valley started only single family units were eligible). The program continues to provide all of the usual horneovmer s insurance policy package coverages, includ- ing fire, theft• and comprehensive personal liability. CHIP can potentially develop premium savings whicn can be returned to the cities to help support belea- gured public safety programs. Early California experience indicates such revenues to be quite possible despite the very competitive coverages and rates. Section 2 — Historical Development The present concept evolved from the concern of Ivtountain View's Byron Chaney over the seeming inequity of the insurance rating system, which did not reflect the City's historically favorable fire loss statistics (Hazen was Assistant City Manager in Mountain View at the time). In 1974 Chief Chaney wrote to a number of i interested individuals and agencies asking "Why shouldn't a city go into the fire insurance business, collect the premiums, and use the insurance underwriting profit to support the fire department?" Chaney's letters resulted in a brief study. funded by the Institute for Local Self Government (ILSG), of Berkeley, California, and, in 1977, by a well fumed, comprehensive feasibility analysis of "Municipal Fire Insurance;' sponsored by the U.S. Fire Administration through a multi -year grant to ILSG. i Since the letters, the study, and the analysis all produced mure negative than positive results, it is unlikely that a viable program would have been developetl if an alert insurance company had not seen an opportun- ity to develop a new insurance pr Juct concept: one which would avoid most of the problems foreseen by the studies. A meeting in Santa Barbara in late 1979, with John Houlihan, of ILSG, William Hanna, of Mission Research Corporation (MRC), and Richard Zizian, of the AVCO Financial Insurance Group, marked i the beginning of the CHIP development. Zizian ana Hanna developed the CHIP framework, but the detailed program design was worked out by an AVCO supported team comprised of city managers, fire and police chiefs, city attorneys, risk managers. legal advisors, and consultants. Literally thousands of hours were expended by the team members talking among themselves and to city administrators and elected officials across the Country. While this was going on, AVCO paid for a series of independent legal opinions, largely developed by the law firm of Miller & Daar, which now form the basis for the statutory and regulatory compliancy of CHIP in California, and elsewhere. Section 3 — CHIP General Conceal CHIP evolved from easy beginnings as a fire insurance concept wheryin the city would bean Insurer, to the r , 'fhe Master Policy concept developed for Mill Valley is still Mill Valley format wherein the city is an insuued. an option, but now another is available as well and there is a more workable marketing scheme.