Staff Report #1
June 28, 2023
To All Commissioners
Re: 2023 – 2024 General Insurance Program Renewal
Recommendation
That the Commission:
i) APPROVE the general insurance program for the period of June 30, 2023 through to June 29, 2024 at a total annual cost of $3,038,483 exclusive of applicable sales tax and deductible costs, the particulars of which are as follows:
| Coverage | Premium | Insurer |
| Automobile | $ 2,367,959 | Zurich |
| Additional Liability ($10 mil) | 299,000 | Marsh Bowring |
| Property | 306,820 | Zurich |
| Travel Insurance | 750 | Industrial Alliance |
| Boiler & Machinery | 2,325 | RSA / XL Specialty |
| Directors & Officers | 25,595 | AIG |
| Environmental | 36,034 | Chubb |
ii) APPROVE the broker services for the period of June 30, 2023 through to June 30, 2024 with Marsh Canada at a cost of $97,500.
Background
In March of 2023, administration began the process with Marsh Canada Limited (the Commission’s broker) for the renewal of the general insurance program for the period of June 30, 2023 to June 29, 2024. The most challenging part of LTC’s insurance program remains the fleet policy. Due to the size and nature of the fleet, there is traditionally a limited number of insurers willing to insure this class of business. In the last couple of years, a strong relationship with another carrier was established opening the possibilities for future discussions, and also serves to keep rates with the incumbent at a market level. As proposals from alternative carriers is a significant administrative undertaking for both the carrier and insured, annual marketing of LTC’s portfolio is not recommended by Marsh every year. The 2023-2024 renewal plan was to start early and seek renewal terms from the current carriers, noting if indications were concerning, then further reviews or “marketing” could take place. After these initial discussions, Marsh felt the renewal terms would be fair and focused solely on negotiating with the current providers.
The overall increase for the 2023-2024 renewal is 9.8%, slightly above the 2022-2023 (6.9%) renewal, but down significantly from 52% increase that occurred in 2020-2021. The renewal rates presented by Zurich for fleet insurance, roughly 75% of all premiums, included an 8.7% increase in rates, with timing of bus and service vehicle additions resulting in an overall 12.2% increase. Marsh indicated that most renewals recently have been in the 8%-12% range, so felt the presented rate increases were competitive with the current market. Other coverage areas for the 2023-2024 renewal saw increases from 0% to 8% over prior years.
The recommended renewal results in an annual premium increase of $280,245, inclusive of broker fees, the details of which are set out in the following table.
| Coverage | 2022-2023 | Premium Increase (Decrease) | Explanation for Increase/Decrease |
| Automobile | $ 2,110,634 | $ 257,325 | 8.7% increase in rate, 12.2% overall |
| Additional Liability ($5 mil) | 304,000 | (5,000) | 1.6% decrease in rate, shift in carrier |
| Property | 283,946 | 22,874 | 8% increase in rate |
| Environmental | 34,235 | 1,799 | 5.3% increase in rate |
| Travel Insurance | 750 | 0 | |
| Boiler & Machinery | 2,203 | 122 | |
| Directors & Officers | 24,970 | 625 | 2.5% increase in rate |
| Broker Fees | 95,000 | 2,500 | 2.6% increase in fee |
| Total | $ 2,855,738 | $ 280,245 | 9.8% overall increase |
The assumptions for the insurance program costs included in the Commission-approved 2023 operating budget are sufficient to cover the negotiated increases detailed above. These increases impacting 2023 will be worked into the multi-year budget, set to be tabled in August.
In addition to the premium costs, LTC historically pays on average between $600,000 and $700,000 annually in deductible costs relating to accident benefits (as required under no-fault insurance) and public liability claims cost. For 2022, deductible costs totaled $505,801, the lowest in eight years. It is still somewhat early to determine the impact of increasing deductibles from $50,000 to $100,000 in July 2020, as the nature of claims can take years to be fully realized. One other factor certainly impacting the level of claims has been the ridership declines witnessed since the onset of the pandemic.
Deductible Payout History
| Year | Liability | Accident Benefit | Total |
| 2015 | 415,554 | 108,151 | 523,705 |
| 2016 | 444,083 | 282,828 | 726,911 |
| 2017 | 510,351 | 134,166 | 644,517 |
| 2018 | 708,368 | 146,115 | 854,483 |
| 2019 | 603,588 | 79,783 | 683,371 |
| 2020 | 456,340 | 116,142 | 572,482 |
| 2021 | 361,566 | 156,466 | 518,032 |
| 2022 | 350,400 | 155,401 | 505,801 |
The roles of adjuster and legal representation have significant influence on the level and extent of deductible payments made, and as such, an understanding of the nature of claims experienced by a transit provider is imperative in order to mitigate payouts to the greatest extent possible. The Commission has a long-standing relationship with ClaimsPro with respect to insurance adjusting services and Shillington McCall LLP for legal representation relating to claims. There are no recommended changes to either the adjuster or legal representation associated with this renewal.
Recommended by:
E.P. (Ted) Graham, Manager of Accounting
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager