New insurance premiums in Wellington North were an unwelcome early Christmas present for councillors, who face a 27% rate hike to renew their policy for 2010.
The new premium estimate is $233,323, substantially over the 2009 cost of $184,246.
A report from treasurer John Jeffery noted Steve Smith, of the Frank Cowan Company, and Bill Nelson, of Padfield Nelson Insurance Brokers, met with the township’s financial committee on Nov. 12.
Jeffery said there are a number of factors affecting the new rates:
– settlements for personal injury claims have risen from the $3- to $5-million range to current settlements of $10- to $15-million;
– courts tend to look at municipal defendants as having “deep pockets” that can be tapped to provide long-term care for claimants;
– as in prior years, there was an emphasis of the Negligence Act in increasing the township’s exposure to liability costs (“if the township is held to be even 1% at fault and the other defendants are unable to pay the court award, the township would be responsible for the shortfall of the others”);
– the total value of properties insured has increased considerably. That increase includes the new sewage treatment plant in Mount Forest, the Mount Forest Sportsplex, plus the overall increase in the replacement costs of all buildings in the township.
Other projects in recent years have included additions to water treatment facilities and the Arthur swimming pool replacement.
The total value of properties insured is now $63,782,000, compared to $46,616,000 in 2009.
“I’m standing close to the back door for a good reason,” Nelson quipped as he announced the figures.
He noted this is traditionally the time of year for insurance renewal.
Nelson said in the past few years, he has been able to come to council with very slight decreases, or very slight increases.
“Unfortunately I stand before you tonight with a much different message. This represents a substantial increase,” he said.
He added a number of things affected the municipality’s insurance, most of which were referred to in Jeffery’s letter to council. One of the driving factors to increased premiums is what is being awarded in general for claims. Nelson said he was not referring to Wellington North specifically, but the marketplace in general.
Another factor is the cost of defending the claims is going up as well.
“We’re also starting to see the full effect of legal contingency fees.”
Now those costs can account for 20% to 40% of the claim, he suggested.
Nelson said a number of claims are being boosted to account for that. He also has concerns about the impact of the Harmonized Sales Tax.
He explained in the past, only a portion of insurance programs was affected by provincial sales tax, and none attracted the GST.
“That will change,” he said.
Nelson said it will change legal fees, which, in the past were subject to only a 5% GST. They now will be levies at a 13% rate from the HST.
Plus, he believes that could affect many aspects of claims, whether it be a 5% GST or the full 13% HST.
He said the Negligence Act is “just a huge impact on insurance in general.”
He estimated personal and auto insurance will also be increasing between 20% to 25%.
Nelson estimated the value of property the township insures has almost doubled since 2006, which also affects its insurance premium.
“The more you have, the more you have to insure. That’s it in a nutshell, although a relatively large nutshell.”
Councillor Ross Chaulk asked if the HST comes into effect, “does it mean $27,000 in tax on our premium?”
Nelson said the township is okay because it has renewed before the HST is in effect, but the new tax will impact claims costs after July 1.
He also agreed there is a lot of “nuts and bolts” to be worked out of the impact of the new tax.
Chaulk said council has not really protested significantly about the HST, but if the premiums are going to go up $18,000 “that’s a whole different ball game.”
Nelson agreed there should be a lot more people screaming about this because of the impact it will have overall.
Councillor Dan Yake said looking down the road, with a 27% increase this year, and the possibility of the impact of the HST next year, “It’s going to impact us negatively. If we looked at 27% increases over the next four years, how will municipalities be able to continue to operate?”
Nelson said it is not just municipalities, but individuals. “While it is easy to blame the insurance companies, the reality is that if we don’t charge the premiums to cover the expenses … we go bankrupt. Then what do we all do?”
Council later adopted the new rates without further discussion.
