Staff Report #2 – 2019 General Insurance Program Renewal

Staff Report #2

June 27, 2018

To All Commissioners

Re: 2018 – 2019 General Insurance Program Renewal

Recommendation

That the Commission APPROVE:

1. the general insurance program for the period of July 1, 2018 through June 30, 2019 at a total annual cost of $1,302,751 exclusive of applicable sales tax and deductible costs, the particulars of which are as follows:

and;

250. broker services for the period of July 1, 2018 through to June 30, 2019 with Marsh Canada at a cost of $77,250.

Background

In April of 2018, administration held discussions with Marsh Canada Limited (the Commission’s broker) with respect to the options associated with the July 1, 2018 general insurance program renewal. It was decided that Marsh would go to incumbent markets for renewal terms this year given there continues to be limited markets willing to write the passenger hazard risks and the few that were approached last year were unable to quote competitively.

The program being recommended provides for renewing coverage with all current insurers. Set out in Enclosure I is a comparison of premiums for the period 2013 through this renewal period. It should be noted that the automobile premium of $1,093,707 with Zurich has just now surpassed the premium of $1,060,912 when insured with Travellers in 2012.

The recommended renewal results in an annual premium increase of $39,159, the details of which are set out in the following table.

As indicated in the table, the majority of the increase relates to the Automobile coverage. The auto fleet had a modest rate increase with Zurich citing an increasing claims trend as the basis. After further negotiations between Marsh’s fleet specialists (our broker) and Zurich, they agreed to a rate increase of 2%, noting the balance of the increase comes from the growth in fleet size. Property saw a slight increase of 0.6%.

The assumptions for insurance program costs included in the Commission-approved 2016-2019 multi-year operating budget are sufficient to cover the negotiated increases detailed above.

In addition to the premium costs, LTC 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 2017, deductible costs totaled $644,517, with accident benefits accounting for $134,166 (21%) of the total. The payouts associated with the accident benefits claims have declined subsequent to the amendments to the no-fault insurance program which were consistent with the recommendations stemming from the 2009 review of the program completed by the Financial Services Commission of Ontario. The amendment moves away from no-fault insurance claims for incidents that occur, or allegedly occur, when there has been no collision. The amendment calls for this type of claim to be handled by the tort system, under which the claimant has the responsibility to prove negligence in order to be compensated. The table below illustrates the positive financial impact of the amendment.

Deductible Payout History

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 McCall Dawson Osterberg Handler LLP for legal representation relating to claims. There are no recommended changes to either the adjuster or legal representation associated with this renewal.

Enclosure

I – General Insurance Premium Comparison 2013-2018

Recommended by:

Manager of Accounting, E.P. (Ted) Graham

Director of Finance, Mike Gregor

Concurred in by:

Kelly S. Paleczny, General Manager

London Transit Commission – General Insurance Premium Comparison