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Managing your risk by Michael Kelly

NCACC Risk Management Director Michael Kelly writes a regular column on risk management for CountyLines. With more than 41 years of risk management/ insurance experience, he holds the CPCU - Chartered Property & Casualty Underwriter, ARM-P - Associate in Risk Management for Public Entities, CRM - Certified Risk Manager, ARe - Associate in Reinsurance and CIC - Certified Insurance Counselor Professional Designations. He can be reached at michael.kelly@ncacc.org or (919) 719-1124.  For archives of this column click here.

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Mar 31

Regional meetings to inform members of pools' offerings

Posted on March 31, 2014 at 11:36 AM by Chris Baucom

During the last week of February and first part of March, the NCACC risk management staff hosted four regional meetings located throughout the state. The purpose for these annual gatherings is to provide members and prospective members of the NCACC risk pools a general working outline of current membership statistics, the pool’s financial update, available risk/loss control services, and anticipated changes in coverage document design.

There is also a discussion of our underwriting/rating procedure, as well as a projection of renewal costs as driven by our reinsurance expenses and pool actuary loss projections. As this definitely affects all of our members, this month’s article will serve as a summary review of our major points for those who could not make any of our sessions. 

Attendance: There were a total of 92 attendees, representing 45 counties and nine county entities. County attendees included member of the Pools’ Board of Trustees, County Managers, Assistant/Deputy County Managers, Finance Officers, Deputy Finance Officers and Accountants, Human Resources Directors and HR technicians, Safety/Risk Managers, and Sheriff’s Department representatives. County entity attendees included Executive Directors, Human Resources Directors and Finance Officers.

Finances: Both the Liability & Property and Workers’ Compensation pools continue to be in a sound financial position. The Workers’ Compensation Pool has unallocated reserves of more than $10 million, and the Liability & Property Pool has more than $42 million. Unallocated reserves in this instance means money in excess of the projected need to settle/close all open claims, not including an additional $12 million pre-allocated reserve for a named storm/hurricane reinsurance deductible. 

Both pools continue to grow steadily in membership and are in the best financial position of the previous 11 years. It is important to also note, during the past two renewal seasons, 100 percent of member counties have elected to continue their pool membership.  This translates to rate stability and a collective reinsurance purchasing power that can traditionally only be found through self-funded governmental risk pool membership.

Special Projects/Announcements: Our cyber coverage expansion plans continue through the addition of a new section to the liability & property coverage document this year, broadening last year’s introduction of a cyber-extra expense $100,000 sub-limit.  It will carry its own liability limits of $1 million per occurrence, with sub-limits of $250,000 for privacy response expense and $50,000 for potential imposed regulatory penalties.  

In addition, this is the first year an annual stewardship report has been developed and distributed to each county, giving actual numbers in dollars outlining some of the savings at the member level achieved though the long-term association with the NCACC Risk Pools.
Third-Party Administrator Report: During the past coverage year, Sedgwick CMS handled more than 1,160 and 1,200 claims for the Workers’ Compensation and Liability & Property Pools, respectively. Through their operational process the Pools achieved a savings of more than $5.4 million through bill review, physician/pharmacy network/ utilization review and their auto damage appraisal program.  The telephonic case management handled nearly 500 cases, generating a savings of more than $600,000.  These savings translate to lower expenses, with zero degradation of service provided, which in turn correlates to the continued stabilization of renewal rates each year.

Risk Control: Since bringing risk/loss control in-house, member’s interest in taking internal steps to reduce their frequency and severity of losses has increased through education and understanding of the cause/effect for a member’s ultimate cost of risk. Their increased understanding is not just related to insurance costs but for potential losses that are not leveraged or financed through coverage, as well.

Those attending received a review of this year’s safety credit review process, which included anticipated changes taking place for the 2014-15 membership year.  In addition, information was provided about several regional training events to include the four regional safety schools and statewide safety events presented by such agencies as the North Carolina Department of Labor (OSH Division), N.C. Industrial Commission, Safety & Health Council of NC as well as the North Carolina Public Risk Management Association (see column by Bob Carruth for more safety training opportunities). Finally, an update was provided on the various risk control resources and services provided to the members.

Insurance Market Environment: There was a summary discussion of present insurance carrier/broker appetite for risk, industry underwriting results for the prior 12 months, and an update on several cases that had been argued at the N.C. Supreme Court.  According to the various risk and insurance publications as well as contact with Broker/Company individuals operating in North Carolina, the commercial client renewal outlook in the private sector generally is generating an overall average rate increase of 7-10 percent depending on class of risk, with a continued, even more restrictive appetite for local government-based risks. There is an expectation for offered deductibles/retentions to be increased with little or no discount in renewal pricing and a continued reduction in the desire to write unsupported workers’ compensation without significant per-loss deductibles.

Pool Renewal Plan Expectations: The renewal process timeline for both pools was discussed. Underwriting/rating meetings are scheduled to be held March 12-13 followed by the Board of Trustees meeting March 26. At that time, the Trustees will formally approve next year’s rates. Applications are available online now at the NCACC RM website: www.ncacc.org/index.aspx?nid=230.

Current property/inland marine/auto schedules will be emailed to our members during the first part of March along with a digital renewal application from Underwriting. Renewal numbers are expected to begin being released during the first full week of April, on a first-in, first-out basis, (subject to complete updated underwriting/exposure information provided) as is our protocol each year.

The Pool’s continued primary goal is to remain as close to a no-change (zero-sum game) status as possible where rating is concerned, passing on any pure reinsurance costs (increase or decrease) tempered by each member’s own claim/loss experience and safety score accumulation. Projected reinsurance costs have yet to be formally received, but based on discussions with appropriate groups we are anticipating a decrease in property reinsurance costs across the state. Long story short, just like the past two years, we expect to continue being untouchable in both cost and coverage design for next year and are anticipating another year of 100 percent membership renewal. Should you have any specific questions please do not hesitate to call us.