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May 14, 1987 <br />Page 'l <br />The deductible analysis projects that, if the same loss <br />experience continues for the future, and if the premium <br />savings currently available continues, the City could safely <br />assume a deductible of $5,000 and expect a net savings in <br />insurance costs over the long term. These savings over a five <br />year period are projected to, be $14,775. Should one of these <br />deductible options be chosen it should be a long term <br />decision, i.e. it should be chosen for a long period of time <br />sng <br />and not just one year. The reason <br />for <br />r theslongthat termchoInianya <br />high deductible only will pay o <br />given year the amount paid under this deductible option could <br />exceed the savings, however, over the long term our claims <br />experience suggests that there will be a savings. <br />I recommend that the City choose the $5,000 deductible option. <br />A fund should be established for insurance claims. Into the <br />fund would be paid the annual savings resulting from taking a <br />deductible option. Expenses of the fund would be only claims <br />and loss adjustment expenses. If the amount in the fund is <br />not sufficient to pay claims and loss adjustment expenses a <br />tranfer de <br />funds <br />wouldobedable etooitawould orepay contingency. the contingency account. <br />RECOMMENDATION: Choose the $5,000 deductible option for <br />savings of $8,000. Establish an insurance fund for the <br />payment of insurance claims and loss adjustment expenses. <br />DB/ds <br />Attachment: Maquire Agency Inc. letter of April 30, 1987 <br />