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HomeMy WebLinkAbout5 Property and Liability Insurance Agenda Item # TRUCKEE uuu DONNE. Public Utility DistrictI Memorandum To: Board of Directors From: Mary Chapman, Administrative Services Manager Date: November 1, 2002 Subject: Consideration of appointing Robb Hubbard of Marsh USA Risk & Insurance Services as the District's Broker of Record to obtain property and liability insurance for 2003-04 and provide other services as proposed. After our 2000-2001 insurance renewal, all but one of the employees in the public entity department at AON Risk Services moved over to Marsh USA Risk & Insurance Services. As you may remember, when the renewal was presented to the Board last April, it was presented by a new representative named Bob Brian. You may also remember that the premiums jumped considerably in price (from $237,652 to $354,634 - a 49% increase). I'm sure that the majority of the price increase had to do with the events relating to 9-11 and the District's increased property values and labor costs. Bob Brian is no longer with AON. I have been told that the reason the staff at AON left the organization was because AON had changed their business model and the staff did not believe that AON's new method of doing business would be beneficial to their customers. In the past, we have always dealt with the same team out of the San Francisco office. Now, when we call to get an answer to a question, we must deal with several different people each time. We're constantly being told that the person we want to talk to is no longer with them. In trying to resolve an invoicing problem, I have had to work with at least three people. We have not been happy with the service since the change. We have only recently received policies and the payment schedule that we asked for did not get implemented properly. As a result, we have asked Robb Hubbard to give us a proposal for brokerage services. You will find that proposal attached. Additionally, I asked him for two things: 1) to propose a flat fee for his services rather than a commission; and 2) to perform a risk assessment and help us to find ways to cut our insurance costs. Next renewal, I am expecting another premium increase in the neighborhood of 20% to 25% and I want to find ways minimize that increase. Robb has represented the District over the last several years and we have always had a good working relationship. I feel that we need Robb's expertise and experience to assist us. I'm not sure that with the revolving door at AON, that the District would be getting the best price and the best service. RECOMMENDATION: To appoint Robb Hubbard of Marsh USA Risk & Insurance Services as the Broker of Record for the District to perform brokerage services as outlined in the proposal; such services will be performed for a flat fee of $35,000 annually and will only change based on changes in the consumer price index unless other services in the proposal are requested. This arrangement may be cancelled by either party upon 90 days written notice. Robb Hubbard Marsh USA Risk&Insurance Services Vice President 3 Embarcadero Center,Suite 300 San Francisco,CA. 94111 Phone:415 743 7741 Fax:415 743 7778 robb.hubbard@marsh.com California License No.0437153 MARSH October 31, 2002 Mary Chapman Truckee-DonnerP.U.D P.O. Box 309 Truckee, CA. 96160 PROPOSAL FOR INSURANCE BROKERAGE SERVICES Dear Mary: Truckee-Donner P.U.D. (TDPUD) is a very special client to our team. We are sincerely pleased to submit our proposal for Insurance Brokerage Services. We stand ready to resume a level of experienced service to TDPUD and to continue a committed partnership of which we can all be proud. In your evaluation of Marsh, you have the benefit of a 10-year "report card" on the professional services, commitment and leadership our team has displayed to TDPUD. Our team has skillfully guided TDPUD through hard and soft markets, and provided highly competitive insurance programs in both environments, achieving a very solid track record of performance. We have striven for the highest possible satisfaction in our service to you, a difficult goal in this business, and we have been a truly committed partner to TDPUD. We believe we have achieved the trust of the Board and staff over the years. On the pages that follow, we have included for your review our service and fee An MMC Company inrro leaeo pvoposel Marsh USA Risk & Insurance Services Page 2 November 1, 2002 Mary Chapman proposal along with various draft documents, including a fee for services agreement, a sample broker of record letter, my bio, and our services plan outline. These documents are designed to clearly demonstrate our commitment to the handling of your insurance and risk management program. In closing, we appreciate the opportunity to present our service proposal. We hope you will choose Marsh Risk and Insurance Services to be your risk partner. We are eager to work with you as you begin to address the challenges of emerging risk management issues in a very hard and difficult market. We look forward to hearing from you. Sincerely, p�p�/ p � a O �'(LYa"Z'GL Robb Hubbard Sr. Client Executive Public Entities C Settings\mnryVLarni Seuines`Tempoary inteme FilesVOLiLZGnv.c£enu pmpacal.goc Marsh USA Risk & Insurance Services Page 3 November 1, 2002 Mary Chapman Services We have included various items for your review. Marsh in San Francisco has not worked with TDPUD, but the account team assigned to your account has experience working with the TDPUD over the last five years. In that time, we provided TDPUD with coverage innovation, pricing consistency combined with a strong service proposition. We are a highly specialized service team that works with nothing but public agencies. We have direct experience with a variety of water and power agencies; moreover, we also understand the concerns facing all agencies in the days of tight budgetary constraints. Added to those issues is the impact of 9/11/01 on the insurance marketplace. After 9/11, the market has experienced significant change and is showing signs of little change over the next 24 months. It is exactly that reason why Marsh is the best choice for TDPUD. Not only do we have a direct understanding of your operations, but as important, we also have in depth experience with commercial insurance carriers. The incumbent has little experience and even less ability to service your account. We would propose that the TDPUD appoint Marsh as your broker of record; as we detail in our proposal, we will work on a fee basis versus a commission on the following insurance policies: General Liability Property Umbrella ➢ Automobile ➢ Crime ➢ Inland Marine ➢ Boiler and Machinery Public Officials Errors and Omissions Earthquake Aboveground Pollution Fiduciary Liability. Marketing We will market all lines of coverage with commercial insurance carriers and we will ascertain the best coverage and pricing for TDPUD. With the experience of our service team and our strong marketing credentials, we are the best bet for keeping your overall costs in line to the extent possible. CAD cn"I t i S fines11a1 I t a1 Sett(ngs'I y Imeme1 F .O.KI—,, enev pm...ai,doc Marsh USA Risk & Insurance Services Page 4 November 1, 2002 Mary Chapman Marsh is generally the largest producer for many insurance carries. For instance, Marsh is the largest producer for St. Paul, your current insurer. This market clout not only with St. Paul, but virtually very major insurer means that we have a great deal of leverage with these insurers. As such, we are in the enviable position of being able to garner the attention of leading underwriters. We also focus our marketing efforts though our Global Broking Division. Global Broking, in concert with the Client Executive, directly negotiates with carriers directly, creating a triangle with points being the Client, Global Broking and the Client Executive working in concert with the designated market. That means that we can obtain the best deal possible. We cannot guarantee what will occur on renewal. In today's marketplace we would be remiss in not telling you that conditions projected for next May would indicate that pricing increase would be likely. However, with the team proposed and lead by a seasoned broker, Robb Hubbard, will working with you to obtain the best possible program at a the best price possible. Administration We will provide all the routine but necessary services directly with the TDPUD; we do not use a service center that is located in a distant City. Your service team will be located in San Francisco with Robb Hubbard. An Account Administrator will be assigned so that in the event that Mr. Hubbard is not available, you will always have a direct contact that knows your account and to whom you can communicate. We will handle the necessary backroom work as a part of our services including: Issuance of certificates Completion of policy summaries and policy handbooks Issuance of additional insured requests Preparation and handling of specifications to go to the market Issuance of binders Billings r Policy reviews for accuracy Review of your various schedules to include in a common database, using Marsh.com Review of proposals from insurance carriers Regular reports and communications Marash.com is our communications portal and is an easy means for our accounts and their service teams to keep abreast of existing or new issues. A description GADo<ume S'mrt "Mn L Senie A fe.... fifl,,.O K2FmRo lever proposai.Aoc Marsh USA Risk & Insurance Services Page 5 November 1, 2002 Mary Chapman of the service, which is included at no expense, will be submitted under separate coverage. Risk Management Perhaps one of the chief areas where we believe our prior experience with TDPUD will be the most useful is for us to complete a risk management survey on your behalf. This process, called a Business Needs Risk Assessment, or BNRA, is designed to allow us to evaluate your exposures compared to the coverage carried. This allows us to assure that you both have appropriate coverage with exposures dealt with as needed. As the TDPUD grows by purchase or acquisition of other water/power customers, having a strong understanding of your exposure allows us to do a better job on your behalf. The BRNA process would include: An insurance policy review Completion of risk analysis using a risk quantification survey (questionnaire) where members of the TDPUD staff would be interviewed to compare their understanding of risk/exposure to that which actually exists To include a survey of perception of risk to allow for the completion of a risk map, quantifying exposure on a frequency and severity axis A financial analysis comparing balance sheet and ledger items with actual schedules presented to the commercial marketplace Interviews with not only management, but other staff would be included in the process Completing a summary report setting findings Claims Assistance As needed, Marsh will supply claims assistance to the TDPUD in the event that problems arise in the manner in which claims are handled., Please refer to our work plan. Fee Presently, we estimate that the TDPUD is paying about $44,000 annually in commissions on the business being handled by our competitor. That figure would not include workers compensation. Renewal terms will likely increase the income on the account even further. CAD.wn.i 1St firma, L SlinenA;enpm'arvinirnetF1 -0K3Gmrro Itne peposal-&,, Marsh USA Risk & Insurance Services Page 6 November 1, 2002 Mary Chapman We would propose a fee of $35,000 annually, with changes based on changes in the consumer price index or if other services, as noted in the proposal are requested. If we were appointed to handle the workers compensation placement, there would be an additional fee for that service. If placement required a commission (some insurance carriers will not issue a policy without a commission), we would reduce the fee to offset that commission received. Full disclosure is the rule within Marsh Risk & Insurance Services. Other Services Our risk-consulting professionals keep us advised of new developments in the law as well as new products and services available to our clients. As the leading provider of brokerage and consulting services to the public sector, Marsh has a wealth of insurance-related information of potential value to TDPUD. We will constantly review Marsh's database or resources for topics of interest to TDPUD, and make them available electronically and in hard copy at Board meetings or retreats. Consulting relating to work force strategies, including behavioral risk management, absence management, cumulative injury management, financial diagnostics and custom risk and insurance solutions; Business interruption and other claims valuation services offered by Marsh's CAPS Claims Accounting and Preparation Services practice; Environmental risk consulting services; Claims services other than those specified above, including catastrophic claims, mass tort claims, claims advocacy services and archival research; r Non-recurring insurance placements involving significant quantitative or actuarial analysis or modeling, placements of risks with financial institutions other than insurance carriers, and placements of risks not customarily accepted by insurers; 9 Actuarial services; and Employee benefits services These services can be priced separately if of interest. ( S n' 1 1 I mporary 1 iOLK2gmrto r o 1111 a1&I MARSH An MMC Company Robb Hubbard Public Entity Practice — Western Region Current Robb is a Vice President and Senior Client Executive of the Marsh Responsibilities Public Entity Practice located in San Francisco. This is a specialized industry oriented Brokerage position dedicated to developing sales and serving the insurance and risk management needs of governmental entities and assisting Marsh offices in the Western Region in producing and retaining public entity clients. Experience Prior to joining Marsh, he was the Aon Public Entity Practice Sales leader working with various offices nationally in sales development efforts and also managed various pooled and individual governmental accounts. Prior to re joining the brokerage community, Robb was an independent risk management consultant specializing in governmental and ulitity district services, including alternative financing,pool development, coverage and risk management reviews. Robb served as the Administrator/General Manager of one of the first pools dedicated to dealing with environmental issues at a state level. The pool managed financial responsibility needs for 2,400 clients and also administered a $200,000,000 cleanup reimbursement program. Robb has claims and underwriting experience and has been associated with the industry for 30 years in various positions. In 1996, Robb was elected as a President of the Society of Risk Management Consultants association. He has spoken before many national, regional, statewide and local conferences and seminars on the topic of insurance, environmental issues and risk management. He has authored several articles on Risk Management practices, cost containment and enterprise risk management. Education Mr. Hubbard received his a B.A. degree from Western Illinois University and has completed 9/10 parts of CPCU. Affiliations PRIMA, PARMA,CAJPA, STRIMA Member of Marsh Industry Practices (Current Date) Marsh Risk& Insurance Services California License No. 0437153 P.O. Box 193880 San Francisco, CA 94119-3880 and Other Concerned Parties: Be advised that effective we have appointed Marsh Risk & Insurance Services, Incorporated to act as our exclusive Insurance Representative of Record and to represent us in all matters pertaining to (Lines of Insurance) Insurance. This appointment shall remain in full force and effect until our notification in writing to the contrary is received by you. We ask that you not object to this appointment and waive any waiting period that you may require for acceptance. This appointment supersedes all other appointments and all other letters of authorization on record. Marsh Risk &Insurance Services, Inc. is hereby authorized to negotiate directly with any interested company as respects changes in existing insurance policies and in closing, changing, increasing or canceling insurance carried under temporary binders or cover notes. We understand, however, that they will not share responsibility for any deficiencies in the insurance program to which this letter applies until they have had a reasonable opportunity to make a review to provide us with their recommendations. This letter also constitutes your authority to furnish Marsh Risk & Insurance Services, Inc.'s representatives with all information they have requested as it pertains to our insurance contracts, rates, rating schedules, surveys, reserves, retentions and all other financial data they may wish to obtain for their study of our present and future requirements in connection with the insurance program to which this letter applies. We request that you do not communicate such information to anyone else. Please render our new Broker any assistance they may request on our behalf. Very truly yours, By: Truckee-DonnerPUD Work - Plan Title/Goal Objective Estimate Hours Staff Assigned A) Products and Services Ongoing Activities Marsh will monitor the risk - Issue insurance endorsements/certificates for policies financing needs of members for placed by Marsh or handled by Marsh 20 RH/staff the purpose of identifying, - Respond to coverage questions relative to all coverage developing or modifying risk in place. included RH/staff financing products and risk and insurance management services - Maintain information regarding current purchase needed by members. options. Annually review these products to ensure the 20 broadest possible coverage. RH/staff On an annual basis provide members with a report containing all current insurance policies, group purchase programs, endorsements, coverage summaries etc. 10 staff - Establish alternate group purchase options by providing risk identification and coverage information to members. included RH/staff - Assist if needed with mid-term insurance coverage modifications and ancillary insurance placements included staff Projects Semi-annual meetings and annual stewardship report included RH Develop information regarding renewal strategy, pricing and coverage changes for the Truckee-Donner PUD insurance programs. 10 RH 80 hours 229 estimated hours per year for projected work activities I Title/Goal Objective Estimate Hours Staff Assigned Communications Marsh will strive to maintain Ongoing Activities effective channels of • Establish semi-annual communication pieces regarding communication with Truckee- insurance and risk management issues. g staff Donner PUD to ensure . Issue State of Insurance Marketplace report in January responsiveness and to make Global Broking RH Truckee-Donner aware of the • Provide report annually regarding status of Marsh work Marsh resources . plan. 10 RH • Provide annual commission/fee disclosure report at request of Truckee-Donner PUD included RH • Provide Marsh.com to expand access to Marsh materials and resources through online sources. included RH Projects • Provide a training session to help representatives understand and access the resources of Marsh to maximize the potential benefits. g RH 26 hours i Title/Goal Objective Estimate Hours Staff Assigned B) Marsh Client Advocacy Oversight Ongoing Activities Marsh Sr. Client Manager will • Review the work and services provided by Marsh monitor staff activities and consultants. Provide periodic updates to the Board of performance, Company activities, Directors detailing the quality of these services. 8 RH operation results, market trends . Develop and distribute annual Stewardship Report and other sources to assess the detailing Marsh activities and accomplishments. 20 RH /KG overall operation of Marsh as respects the satisfaction of • Maintain plan to ensure the knowledge and skills of staff Truckee-Donner PUD members. are regularly updated to stay current with new issues, regulation, products, trends, etc. included RH Projects • Complete a risk management consulting review of overall operations of the PUD. 20 RH 48 hours Title/Goal Objective Estimate Hours Staff Assigned C) Renewal Process Develop marketing strategy and • Renewal strategy meeting: Internal included RH & staff prepare underwriting • Develop marketing information questionnaires 5 RH & staff specifications to place Truckee- . Distribute to Truckee-Donner PUD members Donner PUD programs. included RH & staff • Assist members with application completion 5 RH & staff • Contact Marsh Market Intelligence for updates included RH • Receive underwriting data 3 RH & staff • Perform claims/reserve/data analysis 3 RH & staff • Prepare submissions to market 5 RH & staff • Renewal strategy meeting with Truckee-Donner PUD included RH &staff board • Estimate premiums for member budget purpose by 3 RH &staff February meeting 1 RH & staff • Hefine program objectives 5 RH & staff flegutiate Inns with malkets 5 RH & staff • Receive and analyze market proposals • Discuss/review proposals with Truckee-Donner PUD 2 RH risk management committee. Make recommendations 1 RH & staff • Advise Truckee-Donner PUD of carrier financial 1 RH & staff acceptability to Marsh 2 RH & staff • Make renewal presentation to Board • Bind coverage, issue binders. Title/Goal Objective Estimate Hours Staff Assigned Renewal Process Rene ) • Review rates and verify carrier invoices and issue invoices to Truckee-Donner PUD included RH & staff • Receive and check policies for terms and conditions accuracy include RH & staff • Issue policies to members d RH &staff -------------- 42 hours TitlelGoal Objective Estimate Hours Staff Assigned D) Claims Advocacy Marsh will provide high quality Ongoing Activities and expert claims advocacy • Monitor member compliance with established claims representation as well as claims protocols with excess carriers 2 Claims staff consultation to Board, staff and TPA. • Monitor claims filed with carriers by Truckee Donner 2 Claims staff Ptib • Assist Truckee-Donner PUD in resolving claims and 2 Claims staff coverage issues with carriers • Monitor and review loss-reporting protocols to ensure claim reports and loss runs meet carriers needs and 2 Claims staff expectations Projects • Assist members and TPA in the development of procedures to ensure proper handling of claims by 2 Claims staff 8 hours Title/Goal Objective Estimate Hours Staff Assigned E) Risk Management Services Ongoing Activities Marsh will compile, promote and ' Maintain a database of exposures 10 RH effectively disseminate a wide . Assist Truckee-Donner PUD to manage its Risk range of risk management, safety Management Assessment process. and loss control information to members and continue to • Work with the General Manager and Risk develop, improve and expand Management Committee to create and update a methods to serve as a resource Risk Assessment instrument. 5 RH for members. • Conduct risk management survey and review included RH • Provide updated reports to the Risk Management Committee regarding risk findings. • Maintain virtual library thru Marsh.com detailing risk Included - RH analysis, insurance industry news available to members through Marsh and its resources. 10 RH • Provide Contract Review/ Insurance specifications — — — — — consulting as required 25 hours SAMPLE ENGAGEMENT LETTER (For Fee-Based Compensation) Dear We are pleased that you have chosen Marsh USA Inc. to be your insurance broker. We look forward to developing (OR continuing) a mutually rewarding and long-standing relationship with (INSERT CLIENT'S COMPANY NAME). Our goal is to provide a level of service that assures your satisfaction. The first step in realizing this goal is to ensure that we share a mutual understanding of our relationship. To this end, we have agreed to provide our traditional (CHOOSE FROM THE FOLLOWING: property, boiler& machinery,primary liability, excess liability, umbrella, automobile, workers`compensation, directors & officers,fiduciary liability, employment practices, crime, etc., OR reference service proposal dated_)insurance brokerage services to you at an annual fee of$ (amount),payable as follows: . Compensation will be reviewed and negotiated on an annual basis. Additional services such as, but not limited to(CHOOSE FROM THE FOLLOWING: captive management, risk management claims information systems-STARS, benchnnarking-Dimensions, strategic risk assessment, business continuation planning, specialized loss control& safety consulting, extraordinary claims services, interactive on-line client services, employee benefits) can be negotiated for a separate fee. In the event there is a significant change in your operations which affects the nature and scope of your program, we both agree to renegotiate this fee as appropriate. With respect to insurance placed by us on your behalf, we will disclose to you any commissions received by us and credit them against the annual fee. In the event such commissions for a contract year exceed our annual fee for that year,then excess commissions will be returned to you if permitted by law. Otherwise, excess commissions will be carried forward and applied against our annual compensation for subsequent years. Such commissions do not include compensation that we may receive, in accordance with the custom in our industry,under arrangements with certain insurers which provide for payments based upon such factors as the overall book of business placed by us and our affiliates, the performance of that book or the aggregate commissions paid for that book. We will utilize the services of other intermediaries to assist in the marketing of your insurance, when in our professional judgment it is necessary or appropriate. Such intermediaries may be affiliates of ours or other intermediaries not related to us. The compensation of intermediaries/wholesalers is not included in our fee and will be paid by insurers out of paid premiums. In certain cases, placements which we make on your behalf may require the payment of surplus lines taxes and/or fees to state regulators,boards or associations. Such taxes will be charged to you and identified separately on invoices covering these placements. We will monitor published financial information of your current insurers and alert you when their status falls below our minimum guidelines. We will not, however, be responsible for the solvency or ability to pay claims of any insurance carrier. Insurers with whom your risks are placed will be deemed acceptable to you, in the absence of contrary instructions from you. Our retention by you shall be continuous until terminated. Both parties retain the right to terminate this service arrangement upon 90 days written notice. In the event of termination,we will assist you in (Doeumems and SeNnes, V.00-1SettlnL rempovar,otaneeFile.,AOLK2 elpd_Clint Svc Enemt Lt-Fee doe arranging a smooth transition. However, our and our affiliates' obligation to provide services to you will end upon the effective date of the termination. In the event of a mid-service year termination by you, our annual compensation will be earned according to the following schedule: [NOTE TO CLIENT EXECUTIVE: THE FOLLOWING COMPENSATION SCALE IS ONLYA GUIDE TO ASSIST THE CLIENT EXECUTIVE/CONSULTANT IN NEGOTIATIONS WITH THE CLIENT. OUR COMPENSATION MAYBE DEEMED FULLY EARNED AT INCEPTION, HOWEVER, ONA CLIENT-BY-CLIENT BASIS, WE CAN CONSIDER USING THE FOLLOWING SCHEDULE.] 60% at inception 75% after four months 100%after seven months If we terminate our arrangements with you,our annual compensation will be deemed earned on a pro-rata basis. We appreciate your business and we look forward to working with you. Unless you inform us in writing to the contrary, we will presume that this letter accurately reflects the terms of our engagement. Sincerely, (Client Executive signature) C Don 1 1,lnd S,1fi,, 9L.mal Seacln_A F�*ary Intem Fflee OLK2`xd,d.Chem Svc E,,w Do--Fu,,&, INSURANCE PLACEMENT PLAN Date: 09/20/02 BASYS ID#: Client: CR: CA/Designee: IA: Coverage: Current Carrier: Renewal Date: Coverage: Current Carrier: Coverage: Current Carrier: Coverage: Current Carrier: Is client actively participating in the scheduling process? ❑ Yes ❑ No Responsibility , Activity Target Date CA CR! IA Completed By7Date 1 1. Client Contact (120 days prior to renewal date) ❑ ❑ ❑ 2. Underwriting Info Gathered (90 days prior) ❑ ❑ ❑ 3. Underwriting Info Reviewed (80 days prior) ❑ ❑ ❑ 4. Add'I Limits/Coverages Offered (70 days prior) ❑ ❑ ❑ 5. Specs Created (65 days prior) ❑ ❑ ❑ 6. Specs to Client(65 days prior) ❑ ❑ ❑ 7. Specs to Market(s) (60 days prior) ❑ ❑ ❑ 8. Quote(s) Received (45 days prior) ❑ ❑ ❑ 9. Proposal Prepared/Reviewed with Client(30 days prior) ❑ ❑ ❑ 10, Written Order from Client(5 days prior) ❑ ❑ ❑ 11. Binder(s) to Market(s)(5 days prior) ❑ ❑ ❑ 12. Signed Binder(s) Received (5 days prior) ❑ ❑ ❑ 13. Binder(s)to Client(5 days prior) ❑ ❑ ❑ 14. Client Invoiced (Within 5 days after inception) ❑ ❑ ❑ 15. Policy Admin.(e.g., filings, carts, ID cards, Canadian taxes, surplus lines filings) ❑ ❑ ❑ (Within 5 days after inception) Surplus Lines Warning Letter El El El ❑ ❑ ❑ ❑ ❑ ❑ 16. Policies Received (Within 60 days of inception) ( ❑ ❑ ❑ 17. Policies Checked(Within 30 days after received) ❑ ❑ ❑ 18. Policies to Client/Transmittal Letter El ❑ El within 30 days after received) Attach page with additional comments, if necessary. MARSH C'.Do<vv=emsnM Seu i yVLmnlSen ,T,.,.mryI mel FOe,OLK2Vt#p l ILII.oe Placement Pl-602,Loc