Council action is requested to accept Lockton Companies proposal with a one (1) year agreement, with four (4), one-year renewal periods for Property and Casualty Insurance Agency/Brokerage Services with Lockton Companies for the Finance & Administration Department.

Staff recommends approval and acceptance of the proposal from Lockton Companies.

The City utilizes a broker to market and place insurance. Among the types of insurance the City uses includes property and casualty for all of the City's governmental and business type buildings and operations; excess workers compensation; Directors and Officers; liability; vehicle; large equipment; drone, volunteer; and cyber security coverage. The City's current contract for broker is with Lockton Companies. Lockton works closely with the City’s staff and outside risk management consultants, Charlesworth Consulting.

Periodically, Finance & Administration Department (F & A) reviews the marketplace to see if the level of service received are at the level needed and are priced appropriately. The City currently uses Lockton Companies was as its property and casualty (P&C) insurance broker. Lockton is compensated on a commission basis, and in 2020 received $200,000 in compensation for placing the City’s insurance.F & A requested proposals to provide insurance agency/brokerage services to the City.

The Procurement Division issued a Request for Proposals (RFP) for this service on October 27, 2020. The RFP was published through the Public Purchase e-procurement website, which notified four-hundred seven (407) potential respondents; Thirty-seven (37) accessed the RFP. Six proposals were received in response to the solicitation: McGriff, Seibels & Williams of MO, Inc., Lockton Companies, IMA Financial, HUB International, CBIZ Benefits & Insurance Services, Inc., and Arthur J Gallagher & Co. These proposals were reviewed by a panel of City staff members and the City’s risk management consultants facilitated the review process. The proposals were evaluated on several criteria including experience, price, capabilities, references and selection process (overall responsiveness and quality of the proposal, including interviews). After interviewing Arthur J Gallagher & Co and Lockton it was determined Lockton submitted the best value proposal.

Lockton’s account team is experienced with the various risks of the City from utilities, police, fire and other vital public services, all of which are located in Kansas City. Their team has experience with all of the City’s incumbent insurance carriers and Lockton has a long history of providing the desired services to the City of Independence. The pricing was consistent with other proposals received.

Up to this point, Lockton has been compensated on a commission basis, and in 2020 received $221,836.71 in commissions for placing the City’s insurance. As part of the RFP process, Lockton agreed to move away from the pure commission compensation and agreed to a partial flat fee of $68,500 per year for all lines of coverage except for liability beginning April 1, 2021. These lines will be placed net of commissions, and any commissions will be applied to the flat fee. In addition to the flat fee, Lockton will receive renumeration from the carrier for the liability line.

The exact amount of this renumeration will depend on the insurance premium, but it is projected to be $61,428 for 2021, for a total estimated broker compensation of $112,802 for 2021. This compensation structure will save the City an estimated $75,000 annually.

There will be no fiscal impact to the City in the 2021 budget for this agreement because Lockton previously received commissions for this year. Insurance premiums and insurance broker fees are paid from the City's Risk Management Fund (093-4293).