WELLINGTON NORTH – Facing a 19 per cent increase in the township’s 2021 insurance premiums, council directed staff to investigate potential savings from increasing deductible limits prior to finalizing the contract for the coming year.
“It’s been a very difficult time in the insurance industry,” Andrew Coburn of Coburn Insurance Brokers Ltd. explained to councillors on Jan. 11.
Coburn explained a hardening of the insurance market that began in 2019 and continued into 2020 factored into the premium increase.
“A hard market comes on over time … this is not strictly COVID related,” he explained.
Coburn noted a hard market is “generally brought on by such factors as inflation, low return on investment, weather patterns” and other variables.
“2020 has seen a drastic turn of events. There has been a heavy rate put on and reduced capacity put on by all carriers as a result of the hard market, coupled with COVID,” Coburn stated.
Coburn explained insurers “have been affected by losses resulting from third party liability from the pandemic and law enforcement activities, employment-related practices, wrongful acts of government officials and the big one actually is business interruption.”
The 2021 insurance proposal includes an across-the-board increase of 19%, based on a 24% increase in liability premiums, a 4% increase in the automobile portion of the policy and an 18% increase on property insurance.
Coburn noted the incumbent carrier Sovereign has withdrawn from the municipal insurance market and a portion of the business has been picked up by Zurich Insurance.
The township’s total premium for 2021 will be $243,941, up $38,971 from the 2020 premium.
The township’s premiums have been rising steadily over the past three annual renewals, with increases of 3%, 4% and 8% respectively.
Coburn pointed out recent increases are balanced against previous savings on insurance.
“Once we took over this program in 2013 we were able to save about $70,000 from the incumbent carrier program. We are just now getting back up to where we were in 2013 if that’s any silver lining,” he noted.
Coburn said the program being offered to Wellington North is competitive in current markets.
He noted many policies contain communicable disease exclusion, but Wellington North’s provides up to $1 million in coverage with a $25,000 deductible.
“That’s just in the event if somebody were, or an entity were, to take action against the township. We will have coverage up to $1 million in regard to communicable disease, i.e. COVID,” said Coburn.
Noting there has been “a lot of underwriting pressure on municipalities to double, if not triple their deductibles,” Coburn stated, “We’ve not had that pressure yet from an underwriter.”
While circumstances vary based on claim history and other factors, Coburn said other municipalities are also facing steep premium increases.
“A lot were where we are at this year, at 19%, right up to 65%,” he told council.
Mayor Andy Lennox asked Coburn if accepting higher deductibles would result in savings for the township.
“A 19% increase is pretty hard to swallow … just want to know what the options are,” said the mayor.
“Yes, generally when we look at increased deductibles there are reductions,” said Coburn.
However, he said he would have to check back with the carriers in order to determine what discounts are available.
Lennox asked finance director Adam McNabb what increase the township was budgeting for in 2021.
McNabb said the budget included a 10% increase, “based on the guidance that was available in the market at the time.
“It is what it is,” said McNabb. “The market is hardening.”
Councillor Dan Yake asked if large increases were expected to be an ongoing trend “or are we looking at any possible stability to keep it in line?”
Corburn replied that “all signs unfortunately are pointing to this hard market” continuing, with insurers reporting industry-wide losses in the tens of billions.
“As to how that corrects itself, when it corrects itself, it’s going to be at least another year to be candid,” Coburn stated.
Councillor Sherry Burke asked if Coburn could come back to council with figures based on increased deductibles before a decision is made.
However, the broker explained the current proposal was only guaranteed until Jan. 18.
CAO Mike Givens suggested council could direct staff to consider the impact of increased deductibles and make the decision, as council was not scheduled to meet again until Jan. 25.
“I’m personally comfortable with that, given that we’re going to be going on staff’s experience,” said Lennox.
However, Yake questioned why the insurance proposal was presented on such a tight timeline.
“Why do we leave it so tight, so that we don’t have another meeting if there are questions?” asked Yake.
Givens explained the timeline was tighter than usual this year due to the change in companies.
“It’s a unique scenario in that we’ve lost one of the providers and there is a new one coming on,” said Givens.
Lennox pointed out council does “have the flexibility” to convene a special meeting if needed.
“I don’t think we need another meeting,” replied Yake.
“It’s just that there’s often issues where timelines are so tight we don’t get enough time to ask questions or get the proper response.”
Council passed a resolution to accept the 2021 insurance proposal as presented, but authorized staff to make changes if it proved advantageous after receiving further information on premiums based on lower deductibles.
In a Jan. 20 email, McNabb stated staff were still awaiting information from the township’s broker/carriers regarding deductible options and impact on premiums.
“I will be bringing a report forward for council consideration once all information has been obtained,” said McNabb.
