Agenda Packets - 1987/05/11 - Laserfiche WebLink

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TO: Mayor 6 Council FROM: Finance Director -Treasurer Brager DATE: May 14, 1987 RE: CONSIDERATION OF INCREASING THE DEDUCTIBLE, ON THE CITY'S LIABILITY COVERAGES Our insurance company, The League of Minnesota Cities Insurance Trust, offers several deductible options. These options have the potential to save the City some money on its insurance premiums. These options, however, are not without some risk to the City. The League of Minnesota Cities offers many deductible options. There are two options which I believe the City should consider. The first is a deductible of $5,000 per occurrence on all .liability insurance coverages with an annual aggregate limit of $50,000. If this option is chosen a credit of $8,000 would be given on the annual premium. The second option is a $10,000 deductible per occurrence with an annual aggregate limit of $50,000. This option would result in a credit of $11,000 on the annual premium. These deductibles would apply to all liability insurance coverages presently carried by the City. These include: general liability, which presently has a deductible of $1,000; public officials liability, which presently has a deductible of $2,500 and automobile insurance liability, which presently has no deductible. Loss adjustment expense is included in the deductible amount. To illustrate how the deductible would work assume that the City chose a $5,000 deductible option. In the event of a claim being made against the liability insurance coverages the insurance company would investigate and make settlement if the City is proven to be negligent as they have done in the past. The City would be responsible for loss adjustment expense plus claims payment of up to $5,000 per claim. The annual aggregate limit of $50,000 means that the City is potentially responsible for ten deductibles of $5,000 in a year. The attached deductible analysis, prepared by Charles Clysdale, the City's insurance agent•, indicates that over a six year period the cost of claims $5,000 or less was $21,269 or an average of $3,545 per year. The average number of claims per year was five. The risk that the City takes is that it will have ten claims of $5,000 in one year and pay out $50,000. The City's loss experience indicates that it is not likely that this will happen.