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HomeMy WebLinkAbout18 - Insurance Broker of Record - Property & Casualty InsuranceCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 18 October 14, 2003 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Human Resources, Lauren Farley, Risk Manager, (949) 644 -3302, Ifarley @city.newport - beach.ca.us SUBJECT: Selection of Insurance Broker of Record — Property /Casualty Insurance ISSUE: Does the City Council approve the Council Finance Committee's recommendation for the Broker of Record for property /casualty Insurance? RECOMMENDATION: City Council approves the selection of Brown & Brown (formerly CalSurance) as recommended by the Council Finance Committee and the Selection Committee as the City's Broker of Record for property /casualty insurance with annual broker fees not to exceed $91,500 annually and at a guaranteed rate for three years. DISCUSSION: Background: The city purchases a broad range of property and casualty insurance coverages to protect its assets through a licensed broker in the state of California. These coverages are: All Risk Property (including Boiler and Machinery), Earthquake & Flood, Crime, Fiduciary, Watercraft, Excess Workers Compensation, Excess General Liability, Pollution Liability and Oil Well Bonds. All these coverages renew on 3/1/04 with the exception of excess workers compensation, oil well bonds, crime and pollution. With the hard insurance market (which means premium prices increase significantly and common coverages become scarce) of the last two years, the city has seen significant premium increases in the areas of general liability, workers compensation and property insurance. Increases in the property insurance have tapered off, but the workers compensation and general liability coverages have remained high. Selection of Insurance Broker of Record — Property /Casualty Insurance October 14, 2003 Page 2 After the city received a significant increase in the excess general liability renewal package in June 2002, another broker (Marsh) submitted an unsolicited proposal in October that offered a significant premium decrease. A review and comparison of the coverage under each of the programs offered by CalSurance and Marsh caused the city to switch only its excess general liability insurance program from CalSurance to Marsh effective in January of this year to capitalize on the premium savings. However, it is atypical for a city of the size and scope of operations of Newport Beach to have two brokers for these particular insurance programs. Given this scenario and to assure good risk management practices, the city initiated a review of its existing program of risk management with the intent of determining if the current program is well suited to the city's needs. Part of this review was to first conduct a broker of record selection process and then evaluate alternative coverage sources, specifically municipal group self- insurance pools and or other alternative risk transfer mechanisms, to gauge whether such programs are compatible with the city's operating approach and if such programs might offer economic or other advantages. With the majority of the city's insurance renewals occurring in March of 2004, the timing of the broker selection process favored the August and September timeline chosen by staff. The broker selection process began with inviting proposals to qualified insurance brokers licensed in the state of California. Nine proposals were sent to brokerage firms on August 1St and five responses were received on August 31St. Staff was assisted by Ron Rakich, an independent risk management consultant with no affiliations or obligations to any insurer or insurance broker, in the evaluation of the proposals that were submitted. Mr. Rakich prepared a comparison of the submittals on the basis of the following criteria: Firm Experience (self described), Account Manager, Support Staff, Similar Accounts, Conceptual Insurance Business Practices for Public Entities, Compensation and other notable information. After review of the comparison, three firms were invited for interviews on September 18th based on the best combinations of experience with municipal risks, resources, depth of staff and client references. The firms interviewed included: Brown & Brown of Orange, Driver Alliant of Newport Beach and Marsh of Newport Beach. The selection committee consisted of two outside participants (Karen Adams, Risk Manager of the city of Costa Mesa, Janet Kiser, General Manager of a municipal risk - sharing pool in Orange County), the city's Administrative Services Director, Risk Manager and the city's Risk Management Consultant. The raters were asked to assign ratings of " Not Recommended ", " Recommended " or " Highly Recommended " in each of the following four categories: Qualifications and experience of the firm, Qualifications and experience of the key personnel to be assigned to the city account, Quality of proposal (concepts and approaches) and Capabilities of the firm to perform required services and evidence of their understanding of the city's needs. Selection of Insurance Broker of Record — Property /Casualty Insurance October 14, 2003 Page 3 Based on the comments on the rating sheets and the discussion among the Committee members, the consensus was unanimous that Brown & Brown best met the city's needs as commercial insurance broker based on the following attributes: • Knowledge — extensive knowledge of city operations and risks (15 years for team leader) • Team Approach - to servicing the city in which several executive level persons participate • Detailed Plan - for addressing the city's risk management and insurance needs as exemplified by a targeted proposal • Dedication - to service as exemplified by functions currently performed on behalf of the city that are not common services provided by brokers (review and follow up on evidence of insurance in compliance with contract requirements) • Reasonable Pricing - for services at a guaranteed rate for 3 years including services for which other brokers would charge extra fees • Willingness — to put the city's interests first by assisting the city in looking at self - insurance pools (Joint Powers Authorities) which would be an alternative to the broker's services • Flexibility — Brown & Brown offers the most flexibility as it does not have any incentive to compel or influence the city to participate in broker - sponsored group programs that may not fit the city's needs Based on the information obtained from the written proposals and from interviewing the those firms qualified to serve the city, the Selection Committee chose to recommend Brown & Brown as the city's property /casualty Broker of Record. The Selection Committee's recommendation was reviewed by the Council Finance Committee who unanimously concurred with the recommendation. Funding Availability: funds exist in the budget (6020 - 8720) to cover the expenditure. Prepared by: \ Submitted by: Lauren F. Farley, i c Manager --Diana Axley, HR Director /C