Preserving Educational Budgets by Reducing Insurance Costs: Creating Your Own Insurance Company Presented by: Jim Blumreich, Chief Financial Officer Northeast Wisconsin Technical College Steve Stoeger-Moore, Executive Vice President Districts Mutual Insurance
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Preserving Educational Budgets by Reducing Insurance Costs: Creating Your Own Insurance Company Presented by: Jim Blumreich, Chief Financial Officer Northeast.
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Preserving Educational Budgetsby Reducing Insurance Costs:Creating Your Own Insurance Company
Group program preceded DMI◦ Created by 6, eventually grew to 15 colleges
Developed “trust” of working together◦ Spread the risk◦ Cooperative environment developed◦ Laid the groundwork
Large enough exposure base to bargain as a group◦ No individualized loss control◦ Pay the premium, we’ll pay the claims◦ Group buying, no special services◦ Coverage gaps
History
Trust paid out $26M, $5M in losses◦ 22% loss ratio◦ Premium increases were double digits◦ Budget impact
Intent to control risk management◦ Often neglected – especially at small
institutions
Champions
Timeline
1984• G
roup program started
2002• 1
5 of 16 colleges in group program
2003• S
eptember - Consultant & actuary study
• December – Board resolutions to join DMI
2004• J
anuary - Certificate of authority approval process
• July – DMI began operations
Keys to Success
Consultant• Recommende
d structure• Potential cost
savings• Create
municipal mutual under WI statutes
Actuary• Study
supported financial success
• Potential cost savings
Support• CFOs• Presidents• Boards• OCI
Risk Funding Options
CaptiveRent-a-CaptiveStock CompanyGroup ProgramPoolMutual Company
Coverage Issued
Coverages not noted are covered by WTCS Trust program
Workers Compensation
(Rating done by WI Compensation Rating Bureau)
Property
CasualtyEquipment Breakdown
Campus Violent Acts
Program Retention Levels
$225,000 Company Retention
$25,000Member Deductible
$350,000,000Excess
Including TRIA and Inland Marine
Property
$5,000 Member Deductible
General Liability
$345,000 Company Retention
$4,650,000Reinsurance
$5,000 MemberDeductible
$100,000 Member Deductible
$25,000Member Deductible
Auto Liability ELLBoiler & Machinery
Work Comp
$345,000 Company Retention
$100,000,000 BoilerReinsurance
$4,650,000Reinsurance
$350,000 Company Retention
$4,650,000Reinsurance
$250,000 Company Retention
Statutory Reinsurance Work Comp
$250,000 Company Retention
AircraftWork Comp
$3,000,000Reinsurance
Statutory Reinsurance Work Comp
$650,000X/S $350,000
Reinsurance
Organization
Consultant Legal Counsel
Actuary
Board of Directors
Executive Vice PresidentAccountant
Auditor
BrokerBank
Ancillary CoveragesForeign LiabilityFidelity Bond CrimeBusiness Travel Accident
Property & Machinery / Inland Marine - General Liability - Commercial Auto - Workers Compensation - Campus
Violent Acts
FundingYears 1-3
• Premiums• Artificially
-rated policies (except w/c)
• Paid same as year prior to DMI
• Capital = residual of premium minus expenditures
Year 4
• Premiums• Rates
held steady
• Exposure-based (except w/c)
• Capital = $1.5M
Benefits
Tangible
•Did not borrow to create DMI•$7.6M surplus•Close coverage gaps•Consistent policy limits•Best practices•Focus on loss control•Preserve budget•Services•DMI website (www.districtsmutualinsurance.com)
Intangible
•Services•Loss control, risk management education, hot topics
•Reduced local staff time•Networking•Attitude•Control•Risk management awareness•Company owner – skin in the game