Risk Management is Everybody s Business: Controlling Costs and Maximizing Productivity

Transcription

1 Risk Management is Everybody s Business: Controlling Costs and Maximizing Productivity FGFOA CONFERENCE June 16, :00 2:50 pm Michelle Martin, CIC, Vice President Public Risk Insurance Agency

2 Economical Equipment?

3 Ingenuity?

4 Focus on Cost

5 SUMMARY OF DISCUSSION Introduction 1) Public Sector Risk Assessment: How losses impact your government 2) Responding to Public Sector Risks 3) Administering Risk Responses 4) Market Outlook 5) Questions

6 Introduction Overview 1) Public Sector Risk Assessment: How losses impact your government 2) Responding to Public Sector Risks 3) Administering Risk Responses 4) Market Outlook 5) Questions

7 Introduction 1) Public Sector Risk Assessment: How losses impact your government 2) Responding to Public Sector Risks 3) Administering Risk Responses 4) Market Outlook 5) Questions

8 Public Sector Risk Assessment Identify Risk Exposures including: Primary Risk Focus Employee Injuries (Workers Comp) Administrative Police Property Damage (Automobile & Property) Building-Hurricane Damage Code/Rebuild? Car crashes Consider FEMA/Bond covenants? Liability (General, Automobile, Professional, General) Contractual Risk

9 Public Sector Risk Assessment Other Risks Enterprise Risk Management Cyber Risk - insurable Pollution/Environmental Risk - insurable Pyrotechnics insurable transfer risk to contractor Financial Investment Risk Civil Commotion Et Cetera

10 Public Sector Risk Assessment Identify claims/loss exposure Employee Injury Asset destruction or damage Liability to third parties Understand how claims work

11 Workers Comp Loss Development Volume of Losses and Development Pattern 95% of cash paid out is within 3 years Small percentage of cases are open for far longer Lifetime exposure Only 47% of costs relate to closed claims Balance of costs relate to open claims 5 years later, 15% still open Loss prevention is vital Cost containment Employee health Public health

12 Workers Comp Cost Development 2009 Experience of ~400 public entities in Florida (AVG $30k) In $3.7 million Paid In $9.4 million Paid (Paid loss increased 2.5 times in 5 years) Average WC claim exposure per $100 of payroll (~$1.2 billion payroll of all types of employees) produces $.86 in claims

13 Workers Comp Open vs. Closed Development 15% still open after 5 years Your liability or transferred?

14 Property Damage Claims Exposure Volume of losses and development pattern Incidents are known Greater emphasis on reserves than IBNR Majority of cases close in the first two years. Accident year is virtually closed after 5 years.

15 Property Claims Cost Development

16 Property Claims - Open vs. Closed Open Claims due to pending bills

17 Auto Physical Damage Cost Development Claims resulting from 14,370 fully insured vehicles Average of ~$50 in claims for each vehicle annually

18 Auto Damage Open vs. Closed Immediate certainty of damages

19 Liability Claims Exposure General Liability Professional Liability Other Liability Greater unknowns and IBNR Longer tail before closure

20 Professional Liability Cost Development Alleged Wrongful Acts Not BI/PD High Degree of Uncertainty

21 Professional Liability - Open vs. Closed

22 General Liability Result of Slip and Fall Injury

23 General Liability Cost Development

24 General Liability Open vs. Closed

25 Automobile Liability Cost Development

26 Auto Liability - Open vs. Closed

27 Public Sector Risk Assessment-Conclusions Governmental Entities exposure to loss is great. Each type of loss exposure has its own pattern of loss development related to the degree of uncertainty and predictability of the outcome. It IS certain that losses will occur and that it is incumbent upon everyone in the organization to control them. RISK MANAGEMENT IS EVERYBODY S BUSINESS!

28 Introduction 1) Public Sector Risk Assessment: How losses impact your government 2) Responding to Public Sector Risks 3) Administering Risk Responses 4) Market Outlook 5) Questions

29 Responding to Public Sector Risks 1) Analyze Exposure of scenarios, locations, activities Probability of incident Frequency vs. Severity 2) Evaluate Entity s risk appetite Able to accept self-insurance Acceptable level of insurance expense Internal management resources 3) Best response in YOUR environment Transfer Risk (Insurance), including Risk Share Accept Risk (Las Vegas!) Mitigate Risk (Roof repair, Loss Control)

30 Insurance vs. Self Insurance Insurance vs. Self-Insurance NOTE: Paid in 2009 $1 million Ultimate exposure $10 million

31 Insure or Self Insure Fiscal Year Total Incurred Losses Workers Compensation - $500,000 SIR TCOR Self-Insured Insurance Paid Insurance Premium TOTAL COST OF RISK 2005 $ 3,724,592 $ 3,724,592 $ - $ 512,104 $ 4,236, $ 5,859,114 $ 5,732,826 $ 126,288 $ 512,104 $ 6,244, $ 3,235,597 $ 3,235,597 $ - $ 512,104 $ 3,747, $ 2,932,317 $ 2,932,317 $ - $ 512,104 $ 3,444, $ 4,100,470 $ 4,068,470 $ 32,000 $ 512,104 $ 4,580, $ 4,574,530 $ 4,574,530 $ - $ 512,104 $ 5,086, $ 4,959,641 $ 4,959,641 $ - $ 512,104 $ 5,471, $ 3,974,816 $ 3,974,816 $ - $ 512,104 $ 4,486, $ 4,349,277 $ 4,349,277 $ - $ 512,104 $ 4,861, $ 2,020,706 $ 2,020,706 $ - $ 512,104 $ 2,532,810 $ 39,731,061 $ 39,572,773 $ 158,288 $ 5,121,040 $ 44,693,813 Losses in Excess of Self Insured Retention: 2007 $ 626,288 Mr. Jones CLOSED Knee 2010 $ 532,000 Mrs. Smith OPEN Back

32 A Few Types of Risk Funding Risk Transfer Traditional Insurer - Travelers Public Entities Pooling Fully Self-Insure or partially Self-Insure Alternative Risk Transfer Securities-based such as Catastrophic Bonds Captives

33 Introduction 1) Public Sector Risk Assessments: How losses impact your government 2) Responding to Public Sector Risks 3) Administering Risk Responses 4) Market Outlook 5) Questions

34 Administering Risk Responses JUST A FEW IMPORTANT COMPONENTS: Safety Culture evoking Loss Control methods in coordination with Wellness Claims Management Catastrophic Event Planning and internal coordination

35 Loss Control Safety Training Municipalities not subject to OSHA Should they be? Types of Training Certified on-site trainers On-line resources Posters/Checklists Training needed for: Equipment Use Ergonomics Personal Protective Equipment Drivers

36 Loss Control Inspection Forms/Checklists

37 Loss Control Posters - Guides

38 Loss Control Analytical Data There are a Myriad of Analytical Tools available to identify high-cost or frequency problems.

39 Loss Control Analytical Data Workers Compensation Lost Time = Severity Medical = Frequency

40 Loss Control Analytical Data

41 Claims Management Claims management, both internally and externally, is extremely important for ALL entities. What happens when an incident occurs Property loss who responds? Liability Loss What did your driver say? Handling options for Lawsuit: Employed counsel Contracted counsel Third Party Claims Administrator Insurance provider

42 Catastrophic Event Planning How do you plan for financial implications such as and cash flow delays? Reserves? Pre-planning? It is essential to mitigate timing of repairs Continuity of Operations Who will do repairs? Demand Surge will take place. FEMA Coordination If a claim, how do you coordinate with insurer?

43 Enterprise Risk Management (ERM)

44 Introduction 1) Public Sector Risk Assessment: How losses impact your government 2) Responding to Public Sector Risks 3) Administering Risk Responses 4) Market Outlook 5) Questions

45 US Market Outlook

46 Insurance Market Outlook Property Liability General/Auto Professional Workers Compensation Budget Implications Impact of Exposures

47 Introduction 1) Public Sector Risk Assessment: How losses impact your government 2) Responding to Public Sector Risks 3) Administering Risk Responses 4) Market Outlook 5) Questions

48 Questions Michelle Y. Martin, CIC Direct: Mobile: