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Home My WebLink About2299_001rM Trustee Wattenberg reviewer for the publi c and the Commi ttee of the Whole a recent newspaper art icle in the Herald discussing the Court, its handling of DUI cases, and a nutiber of continuances in such p4tViers . The Village Prosecut"Orl, Buzz Hill, was quoted in 'tbAt article stating that a ,Barrington Hi 11 s woman had rec,oV�d a number of cont-inuaraces and a number of prior convictions. Mr. H3L11 would not, release the name of either the defendant or the Judge and Trustee Wattenberg suggested that this matter is public information'' and that the Village Manager should see that this 3L n f" brmAtion "is released. The Village Manager was instructed to,vr'il'te a letter to the Village Prosecutor offering him the Village's opinion and asking him whether or not the article was accurate. Trustee Wattenberg also reviewed recent actions in bpringrield and suggested that some of these matters be talked about withIs our Legislators at the ipal nn Conference dinner on Friday. These mattersncluded Citizens Utility Board, Frivolous Lawsuits, Taxation and bureaucratic paper work, proposals regarding the U. S. Supreme Court and the Federal Judiciary System, Trustee Floros suggested, and the Committee of the VIhole concurred', that theadministration secure copies of ice. Ordinances adopted a number of north and northwestern urban communities holding parents responsi, - Di I e for j 0-1 uveniie alcohol consumption in their homes. The administra- tion was * instructed to secure those Ordinances and prepare some review at a subsequent Village Board meeting. IX. ADJOURNMENT There being no further business, the meeting was aajourned at 9:30 p.m. Respectfully submitted., TERRANCE L. BURGHAKD Village Manager TLB /rcw Villagk- -if M�ount Prospect Mount Prospect, Illinois INTEROFFICE MEMORANDUM �,, �, TO: Terrance L. Burghard FROM: John A. liedstr DATE: June 23, 1983 SUBJECT:Vill 0 e Insurance Pro- ram 941. IRMA Membersh jp All, lie & all HIM, 11111 a rra m-, Village Of Mount Prospect Mount Prospect, Illinois INTEROFFICE MEMORANDUM To Terrance Bur hard FROM: John A. _Hedstrom DATE: June 7, 1983 Owl 41 lij SUBJECT: Village Insurance Program IRMA Membership Ell, Al' IN, IF Ell MIN fill I Wml LIN Terrance Burghard Page 2 June 7, 1983 Since there have been numerous changes in Commissioners, we have not submitted a status report on this subject to members of the Finance Commission. However, because IRMA has adopted a date of September 1, 1983 for commitment of continuing membership after December 31, 1983, 1 suggest that we furnish what information is available to members of the Village Board and Finance Commissioners in June so that any Finance Commission's recommendations would be available for inclusion on July 26, 1983's Committee of the Whole agenda leaving enough time for final Village Board action on August 16, 19830 This is about all the information we have at this time but we will make a *1able what does come in at June 15, 198360 available VillagL_ -if Mlount Prospect Mount Prospect, Illinois -INTEROFFICE MEMORANDUM�� ;,�� TO: T. L. Burhgard, Village Manager FROM: J. A. Hedstrom, Director of Management Services SUBJECTI,, Village Insurance Program Irma Membership DATE, March 9, 1983 mo Irma's (Intergovernmental Risk Management Agency) first 5 year term expires on December 31, 1983 and late in the year, pro- bably October, each current member will be asked to commit themselves regarding continuation. You will recall that late last year Mount Prospect's Board adopted a resolution stating it was the Village's intention to remainin IRMA after 1983. Since the Village must now start on the preliminary evaluation of this subject, we asked Arthur J. Gallagher to develop some estimated costs using a self-insurance approach in which Mount Prospect does not remain in IRMA. On February 28, 1983, Gallagher submitted a proposal which is enclosed with this memo. Summarizing this proposal indicates fixed costs of $111,300 and variable (claims paid) costs of $135,000 for total annual costs of $246,300. This compares with 1983 IRMA premium of $262,946 plus 1981 $1,000 deductibles of $22,652 (latest full year available) for a total of $285,598. The difference between $285,598 and Gallagher proposed,Costs of $246,300 indicates a reduction of $39,298. Gallagher's proposal for fixed costs of $111,300 includes $85,000 for excess coverage itemized as follows: Lloyds of London All Lines $ 54r000 Central National Buffer Laver 261,000 Midland insurance Umbrella 5r000 $ 85rOOO Gallagher personnel claim this excess coverage duplicates insurance now provided to IFMA, members and that Gallagher people wrote the details of these policies for these Carriers. The remaining elements comprising $111,300 are $25,000 for administrators fee' plus $1,000 for a self-insur- ance bond. 2 Variable costs of $135,300 represent average annual claim losses or "deductible" portions that would be paid directly by the Village. While Gallagher's $111,300 for fixed costs has to be accepted as reasonable, I don't go along with their expected variable costs of $135,300 nor with use of a separate loss fund. As of December 31, 1982, IRMA had paid and reserved on behalf of Mount Prospect, amounts totaling $495,439 since July 1, 1979, the Village's entry date into the agency. This represents an annual averag of $141,554 including "shock" or "catastrophiclosses which if all but the deductible portion were eliminated brings the'annual average down to $88,910. These amounts are annual averages over a 3J year period whic-h Gallagher people claim represents a solid enough time period for pro3ecting averages regarding insurance. since average annual claims are not all paid in the same year in which losses occur, IRA and Gallagher use a five year pay out period developed as follows: Using an annual payment schedule as shown above and an interest rate of 8%, indicates a deposit of $79,622 would fund $88,910 over this period. This is one of the underlining principles used by IRMA and by the insurance industry that would become available to the Village on a self- insured basis. It is also one item Gallagher did not use in their pro- posal although they did footnote this fact. It is also one reason why I don't go along with Gallagher's proposed use,of a $250,OOC loss fund which would further reduce costs. I seriously doubt if any entity would divert $250,000 into some interest bearing account and then rationalize that interest earnings on this $250,000 represented a reduction in other costs. Sununarizing our analysis indicates projected costS that would be incurred by the Village in going self-insured would be $111,300 for fixed elements plus $79,622 for variable equaling a total of $190,922. Deducting $190,922 from current IRMA costs of $285,598 results in reductions of $94,676. This can be compared with Gallagher's reduction of $39,298. What hasn't been pointed out so far is that insurance works on loan average" basis meaning in most years, claims will be higher or lower than average but that the average will prevail over a period of years such as 3J used in these projections. It should also be mentioned that a good deal of IRMA data is considered to be legally "Privileged", which could make it tricky to deal with in public. ,Annual Annual Present Year Percent Amount Value 8% 1 30 $26,673 $26,673 2 25 22F227 20,F581 3 20 17f782 15,245 4 15 13,336 10,r587 5 10 8,892 6,r536 100 $ 8 8 0glo $79,622 Using an annual payment schedule as shown above and an interest rate of 8%, indicates a deposit of $79,622 would fund $88,910 over this period. This is one of the underlining principles used by IRMA and by the insurance industry that would become available to the Village on a self- insured basis. It is also one item Gallagher did not use in their pro- posal although they did footnote this fact. It is also one reason why I don't go along with Gallagher's proposed use,of a $250,OOC loss fund which would further reduce costs. I seriously doubt if any entity would divert $250,000 into some interest bearing account and then rationalize that interest earnings on this $250,000 represented a reduction in other costs. Sununarizing our analysis indicates projected costS that would be incurred by the Village in going self-insured would be $111,300 for fixed elements plus $79,622 for variable equaling a total of $190,922. Deducting $190,922 from current IRMA costs of $285,598 results in reductions of $94,676. This can be compared with Gallagher's reduction of $39,298. What hasn't been pointed out so far is that insurance works on loan average" basis meaning in most years, claims will be higher or lower than average but that the average will prevail over a period of years such as 3J used in these projections. It should also be mentioned that a good deal of IRMA data is considered to be legally "Privileged", which could make it tricky to deal with in public. 3 follows: Summarizing Gallagher's proposal and our analysis comes out as I., Gallagher's Proposed Our Costs Analysis Current IRMA Costs $285,598 $285,598 Proposed Costs 246,300 190,922 Projected Cost Reductions $ 39,298 $ 94,676" This summary indicates it is certainly feasible for the Village to at least consider a self-insured approach since costs can be reduced by some amount between $39,298 and $94,676. In addition to a cost reduction other intang- ibles accrue from self --insuring such as better control over the adminis- trator and the ability to appoint a law firm acceptable to the Village Board. I suggest a schedule somewhat as follows be used in order to Put the Board in a Position of making a final decision on this question by - late September. P Date Action Required March -April Get Board approval to present to Finance Commis sign May - Finance Commissions consideration June -July - Solicit bids for excess coverage and Administrator August Finance Commission evaluation & recommendation September - Village Board evaluation & recommendation and Probably adoption of a resolution Following a timetable as outlined above would permit notifying IRMA of Village intentions in October as well as setting up mechanics for implementing a completely self-insured Program by January 1, 1984 if this is proven feasible. We will take no further action until we have directions from you go ............. VILLAGE OF MT -a PROSPECT SELF-INSURANCE PROPOSAL ARTHUR J. GAL LAGHER & CO. CHI(;,;GO 411 June 10, 1983 Mr. John Hedstrom Village of Mt. Prospect 100 S. Emerson Mt. Prospect, Illinois Re: Insurance Program Marketing I The Village of Mt. Prospect could easily spin off from IRMA and start 'Its own self-insured program. There would be no loss of excess insu�`a_nce coverage,,, Since 'we can arrange the same prhograrn as IRMA through our Lloyd"s brokera,ge`,flrm,.' 'The program cost would not be locked in a's it is With IRMA. The village wou,ld have the potenti,al, for greater savings but also, a potential upswing that is not in IRMA, ! I There are an infinite number of possible self-insured programs available and this proposal illustrates only one. The reason we have chosen the following structure is that it is prudently protected with reasonable specific retent,ion levels and proper aggregate ex ess insurance that I*m*ts, the village's potential loss dollars in one year. Other programs, while they may create large up front savings, will have a much more severe potential over the long run. This program illustrates what is available in the current marketplace. We are aware that the village would, not incept a program until January 11, 1984. Athough we cannoit guarantee that an identical, program can be, placed on, Jan,uary 1, 19,84, we are co,nfident� that barring any major change, in our industry, we will be able to place a similar program- to that contained on the following pages. W Enclosure VI-ILLAGE OF MT, PROSPECT SELF-INSURED PROGRAM h Overvi*ew The structure of this self'-li,,nsured program, w'ould be the same as that of any sellf-insured' program. The village would appollnt Arthur J. Gallagher & Co. as, the broker and consultant to perform the 'following functi,ons; I* Arrange excess coverage. 2. Arrange a service organization (Gallagher Bassett) to perform the following funs tions: A. Claims Management B, Loss Prevention and Safety Services C. EDP Reporting of Loss Experience 3. Ongoing risk management input on behalf of the village and the excess carriers, 4. Representing the village with the state regulatory bodies. The village would continue to operate on a day- t—day basis the same as it has in IRMA. The only difference is that rather than paying an annual V" upfront contribution to the Risk N11'anagement Assoclatlion, the village, would assurn,le a-11 management of the insurance funds and directly derive the W benefits of' cash flow, interest eanings, and PaYoutof clai,ms, lu 0 'Do 6 F VILLAGE OF MTw PROSPECT ExcessInsurance Lloyd's of London k,enTral National Midland Insurance Gallagher Bassett Self -Insurance Bond (Estimated Premium) otal Fixed Costs All Lines Buf fer Layer Umbrella Variable Costs (Losses) Average Annual Losses Unlimited Average Annual Losses Limited @ $100,000 Maximum Losses (Loss Fund) Loss Level Minimum $ 0 Average Limited @ $1009000 135,300 Maximum 2509000 549000 262000 59000 259000 .............. . 0 0 01 A 181,100 1359300 2509000 Pure Cost * $ 1111000 2462300 361,000 *Assuming no *interest earnings, all losses paid within year occurred. 1#0 UILZM-M 5000e 100000 150000 200000 250000 300000 350000 LOSSES ONUMMMOM, Estimated Current Cost ow w 40 140 Proposed Costs do we, ARTHUR 3, GALLAGHER & CO, YEAR PREPARED . • VILLAGE PROSPECT Fixed Cos ts Annual Loss Fun ] Expected Claim 111,000 250,000 135,000 Claim Pay Out t .ate: Year 1 30% Year 2 25% Year 3 20'x► Year 4 15% Year 5 109 100% Assumed Interest Rate 12% Year l Year 2 Year 3 Year 4 Year 5 Total Pay Out Rate 30 25 20 15 10 100 Paid Claims $ 409500 $ 339750 $ 279000 , 209.250 , 13 ,.500 $1359000 Fund Balance 2099500 1759750 148,750 1289500 1159000 Earned In teres t 279570 269423 423 2.5,949 26,228 27 , 350 1.3.3,.521 Fixed Cos ts 1119000 Less Fuad 250,000 T es: Fund Balance -1159000 IJess: Interest -1339521 NET PROGRAM COST 112,47.0, ARTHUR J, GALLAGHER & COa 5 YEAR CASH PREPARED FOR: VILLAGE OF MTe PROSPECT Fixed Cos ts Annual Loss Fund Expected 111,000 250,000 2009000 Claim Pay Ou t " ,ate: Year 1 30% Year 2 25% Year 3 20% Year 4 15 Year 5 10% 11 100 Assumed Interest Rate 12% Year 1 Year 2 Year 3 Year 4 Year 5 Total Pay Out Rate % 30 25 20 15 10 100 Paid Claims $ 60,000 $ 509000 40,000 0,000 $ 20,000 $200,000 Fund Balance 190,000 140,000 100, 000 70,000 50,000 Earned In teres t 26,400 22,968 209324 18,563 179791 106, 046 Fixed Cos is 1119000 Loss Fund 2509000 Less: Fund Balance _50, DDD Less: In teres t _I 06,,w . 04 6 NET PROGRAM COST 204,954 ARTHUR J. GALLAGHER & CO. 5 YEAR CASH FLOW EXHIBIT PREPARED FOR: VILLAGE OF MT. PROSPECT M Fixed Cos is $ 1119000 Annual Loss Fund 2509000 Expected Claims 2509000 Claim Pay Out Rate. Year 1 30% Year 2 25% Year 3 20% -As Year 4 15% Year 5 10% 100% Assumed Interest Rate 12% Year I Year 2 Year 3 Year 4 Year 5 Total Pay Out Rate % 30 25 20 15 10 100 Paid Claims $ 759000 $ 629500 50,000 379500 $ 25pOOO $250,000 41 Fund Balance 1759000 1129500 629500 252000 0 Earned In teres t 252500 209310 159997 129667 102437 849911 Fixed Cos is $ 1119000 Loss Fund 250,000 Less: Fund Balance 0 Less: In teres t -84p911 NET PROGRAM COST $ 2769089 M COVERAGES LIMITS STRUCTURE E2 M w Property Limit $1,500,000 Per Loss/Per Location All Risk Perils Replacement Cost Flood Coverage $500,000 Annual Aggregate Valuable Papers $100,000 Extra Expense $100,000 Electronic Data Processing Builder's Risk Comprehensive General Liability Premises be Operations Bodily Injury and Property Damage Products Liability Blanket Contractual Broad Form Property Damage Personal Injury A -B -C with Employee Exclusions Deleted Host Liquor Liability/. Liquor Liability Employees as Insureds, including Elected and Appointed Officials Paramedic Liability Police Prof essional Independent Contractors Watercraft Liability Nonowned Incidental Malpractice Employee Benefit Liability Errors and Omissions Comprehensive Auto Liability A; Bodily Injury and Property Damage Uninsured Motorists Coverage Nonowned & Hired Auto Coverage Collision and Comprehensive Employee Fidelity Bond including Faithful Performance Money and :securities In and Out M In Umbrella Excess 01 Limit $5,000,000 Self -Insured Retention $10,000 Follow Form Endorsement Police; Paramedics; Errors & Omissions; Watercraft; Failure to supply water; breakage of Dams, Discrimination Exclusions C,C,C; Injury to Volunteers* ERISA Inverse Condemnation; Airports; Medical Malpractice M VILLAGE OF MT. PROSPECT TOTAL LIMITS ALL POLICIES INCLUDING SIR'S Property: $ 195002000 Limit per Loss/Location All Risk Replacement Cost $ 5009000 Flood Aggregate Public Liability.* $1091009000 Each Occurrence Bodily Injury & Property Damage Auto Liability: $1091002000 Each Occurrence Bodily Injury & Property Damage Police Professional: $1071009000 Annual Aggregate Errors & Omissions: $1091009 000 Annual Aggregate Employers' Liability: $1011009 000 Each Occurrence Medical Payments Autos & Premises: $ 5,000 Each Person Employee Fidelity: $ 25,000 Each Employee Money & Securities: $ 259000 Each and Every Loss Auto Physical Damage: Replacement Cost Less $100 Ded. Uninsured Motorist. $ 159000 Each Person $ 309000 Each Occurrence Extra Expense: $ 100,000 Blanket Valuable Papers: $ 1009000 Blanke t Annual Loss Fund: $ 250,000 All Insured Losses $ 5009000 Aggregate Loss Fund $10,100,400 $5,000,000 Umbrella Midland Insurance 4P $5,100,000 $5,000,000 Buffer Excess Central National $1,500,000 $1,000,000 Excess Central National $ 500,000 $450,000Excess Lloyd's I $100, 000 OPINION $50,000 Excess Lloyd's 0 000 tendon $100,000 2,50,00,01/$500,000 $5 , Re Retention ss, Fund Lloyd's Property* General Liability Workers' Compensation Auto Physical Auto Liability Inland Marine Public Official Police Paramedics *$100 Maintenance Deductible not Included. LOSS D ATA M VILLAGE OF MT. PROSPECT AVERAGE LOSSES Total Years Average Workers' Compensation Unlimited $4149655 3.5 $118,473 Limited @ $1509000 304,155 3.5 86,900 Limited @ $100,000 254 ,155 3,o5 729615 Remove shock loss 1549155 3.5 449044 Fire 319885 3e5 9,110 General Liability 649458 3.5 18 9 416' Auto Physical 41, 954 395 119987 Auto Liability 819008 3.5 237145 Annual Average Unlimited $1819131 Annual Average Limited @ $150,000 $1499558 Annual Average Limited Cd 5100,000 $1359273 Annual Average Less Shock Loss $1062702 M 11) 12 M VILLAGE OF MT. PROSPECT LOSS ANALYSIS* Workers' Compensation W V 1980-1981 1981-1982 1982-1983 Fire/EC/All Risk 1979-1980 1980-1981 1981-1982 1982-1983 General Liability 1979-1980 1980-1981 1981-1952 1982-1983 Auto Physical 1979-1981 1980-1981 1981-1982 19824 983 Auto Liability I 1979-1980 1980-1981 1981-1982 1982-1983 *1979-1980 year 6 months $ 109505 $ 59315 459300 238,341 609283 109896 28,647 131p456 2839199 0 30,690 445 750 .: 43,918 0 0 0 0 0 0 0 500 1,705 0 0 30,565 7.287 Total 0 30,690 445 750 mqjm�4-01, ► � n VILLAGE OF MT. PROSPECT 481� MAJOR LOSSES IN EXCESS OF $109000 M Year Description Paid Res. Total Workers' Compensation 1980 Hit by train/death $ 309272 $2309228 $2609500 1981 Fall on floor 109488 79628 18tl16 1981 Back injury 17,600 0 179600 1981 Fall on floor 29510 109589 13t100 Fire/EC/All Risk 1980 Water Damage, hole 149256 0 14p256 in roof General Liability 1979 Fall on sidewalk 14t653 424 151077 Auto Liability 1981 Head-on collision 200 249800 259000 M