Memorandum

City of Lawrence

City Manager’s Office

To:	Brandon McGuire, Assistant to the City Manager
FROM:	Gary Cooper, Risk Manager
Date:	December 9, 2015
RE:	2016 Excess Workers’ Compensation Policy Renewal

Background

The City maintains a self-insured retention of $750,000 for its workers’ compensation insurance program.  The City pays the first $750,000 of any workers’ compensation claim.  The excess carrier pays statutory limits above the city retention of $750,000.

Renewal Process

Few carriers will write policies for small municipal entities.  In the 2015 renewal process, the City solicited bids for this policy and received only one response. The same has occurred for the 2016 renewal. There is very little competition in the small municipality workers’ compensation market. This is due to the high hazard occupations found in local government including first responders and manual labor positions that utilize heavy equipment. The high percentage of first responder payroll in relation to the city’s whole workforce is a reason given by other carriers for not quoting the City’s workers’ compensation policy.

The City’s current Excess Workers’ Compensation policy broker, AJ Gallagher, submitted the only bid in response to the City’s solicitation. Staff discussed options with the broker and determined that completing a renewal application with Safety National and obtaining a quote for the 2016 policy period was in the City’s best interest. The insurer’s final quote for the 2016 renewal ($78,169) represents an increase of $9,712 over the 2015 premium. 

Workers’ compensation continues to be one of the major insurance and risk management issues facing municipalities. Rising medical costs, reserve adequacy, and a weak financial market cause concerns with insurance carriers, and the challenge is made greater by the police and fire employment classification codes.  These two classifications represent over 40% of the City’s workers’ compensation payroll.  Finding competitive carriers willing to write municipal workers’ compensation coverages is a continuing challenge to marketing this coverage for the City.

Recommended Action

Staff recommends renewing coverage for the Excess Workers’ Compensation policy with Safety National for the insurance period of January 1, 2016 to December 31, 2016 in the amount of $78,169.