Item Coversheet
City of Independence
AGENDA ITEM COVER SHEET
Approved

Agenda Title:

Approval of 2020-2021 excess workers’ compensation insurance renewal.
Recommendations:

Staff recommends approval. The renewal proposal was submitted by Lockton Companies, Inc., who has been the City’s insurance broker since 2005. The proposal was also reviewed by Charlesworth Consulting, LLC, the City’s risk management consultants.

Executive Summary:

The 2020-2022 renewal proposal is the result of an extensive effort by Lockton, Charlesworth, and staff to maintain the City’s self-insured status for its workers’ compensation program. The anticipated excess workers’ compensation insurance premium is $344,977, a 33.7% increase over the last year.

Background:

The City is self-insured for workers’ compensation, meaning that it pays its own claims and uses a third-party administrator to manage claims. The City is one of the oldest self-insured entities in the State of Missouri. Being self-insured, the City has more control over how claims are administered – providing better care for injured employees – and can save money over time if it has limited losses. For large losses, the City purchases excess insurance, which caps the City’s liability per accident.

Unfortunately, the City has had unfavorable claim development over the last 5 years, which has negatively impacted the workers’ compensation program. Historically, the City has purchased excess insurance for losses exceeding $1,000,000 per accident. But no carrier was willing to provide renewal coverage below $1,500,000 per accident. Raising the self-insured retention (SIR) required approval from the Missouri Division of Workers’ Compensation, which was granted in June. The City remains responsible for any losses below the retention.

The increased SIR and renewal premium was anticipated, and much of 2019 was spent revamping the City’s Workers’ Compensation program. In May 2019 Charlesworth Consulting took over administration of the program, and in June 2019 all open claims were assigned to outside counsel. In October 2019, the City issued a RFP for a workers’ compensation third-party administrator and selected Thomas McGee to take over all claims beginning January 1, 2020. Thomas McGee will also provide loss control services to supplement Lockton’s loss control team.

Perhaps the most positive change has been the creation of a City-wide Safety Committee. Stakeholders from across the organization are engaged in the committee and are working to enhance the City’s safety culture. While the Safety Committee is staff directed, the City’s outside partners are also involved.

Unfortunately, these positive changes will take time to bear fruit. Insurance underwriters base their quotes on historical losses, so the City will need to show quantitative improvement before excess insurance terms become more favorable.
Emergency Justification:




Fiscal Impact:

The fiscal impact to the City is $344,977. The premium will be paid from the City's self-insurance workers compensation fund account number 6592-5207. The premium will be passed through to departments in the 2021-2022 budget based on 2020-2021 claims data for each department (department line item code 5207).

Department:          Finance and AdministrationContact Person:          Bryan Kidney


REVIEWERS:
DepartmentAction
Finance DepartmentApproved
Finance DepartmentApproved
City Managers OfficeApproved
City Clerk DepartmentApproved

Council Action:          Council Action: