Over the years, our agency has discovered that if there is onephrase that sums up our approach to business, it would be“specialization through team expertise.” We serve all types ofspecialty clients, including contractors, nonprofit organizationsand dentists. My particular specialty is public entities: I devotemost of my time to meeting the unique insurance and risk managementneeds of school districts, municipalities, counties, specialdistricts and other tax-supported entities. In Oregon, we're proudto serve as agent of record for approximately 120 public entities,including roughly 25 percent of Oregon's public schooldistricts.
To best serve these clients, we created a public entity team thatincludes dedicated staff members in three Oregon offices: Portland,Eugene and Medford. This team includes a full-time public entityrisk manager with more than 25 years of experience. We also have anaccount executive (producer/handler) in each office, as well asdedicated support staff. I am one of our account executives in thePortland office, managing our statewide practice, developingadditional supply by attendance at carrier council meetings andother carrier expansion activities, interfacing with a wide varietyof risk management resource “suppliers,” and handling largeraccounts. Our parent company now brings us specialized risk financeresources to help serve our public sector customers.
When it comes to prospecting, we take the old-fashioned approach:We go out and see people. As with any other specialty, publicentities business is based on relationships. Public officials mustbe able to trust our integrity, knowledge and expertise, and theonly way to build that trust is face to face. Consequently, ouraccount executives spend a lot of time in the field. We're alsoactive in the Public Risk and Insurance Management Association(PRIMA)–our staff both attends and sponsors its functions, andwe've spoken at its national meetings and at those of its Oregonstate chapter.
Because of our more than 50 years' involvement in the public-entityniche, our marketing efforts are more than targeted-they're“lasered.” Instead of routinely issuing monthly newsletters forclients and prospects, we issue more timely updates asneeded.
For instance, we published a newsletter last December explainingthe implications of the Oregon Supreme Court's ruling in Clarke v.Oregon Health Sciences University. This decision made it clear thatpublic entity employees, if not public entities themselves, couldin some cases be liable for substantially higher damages than theOregon Tort Claims Act's $200,000 total cap on economic andnoneconomic damages. On another occasion, we published a newsletterthat addressed public entities' responsibilities for protectinginformation about private individuals.
Responding to RFPs
One particular area where all this relationship building reallypays off is in the RFP process. In Oregon, public entities choosetheir insurance agent by the request for proposal process ratherthan by simply letting bids. Although there is no legally mandatedinterval between RFPs, public entities typically issue them everythree to five years.
We're usually not notified when a public entity is going to issuean RFP. Rather, it's incumbent on our account executives to stay intouch with the public entities, so they'll be aware of suchopportunities when they arise. (Of course, we also respond to RFPsissued by current clients.)
In an RFP, a public entity does not seek specific insuranceproposals, but looks primarily for a demonstration of agencycapabilities. Our reply to an RFP takes the form of an informationpacket that outlines the services we can provide–e.g., customizedloss control programs–and references from existing clients. Thisresponse is not cobbled together from “boilerplate,” butpainstakingly tailored to the exposures and experience of thepublic entity issuing the RFP.
Here is where we realize the benefits from all the time our accountexecutives spend in the field. Suppose, for instance, that a schooldistrict in a rapidly expanding area is building new facilities tokeep up with demand. Our reply to its RFP might address thecontractual risk management issues faced by the district and howbest to transfer liability risks to contractors and subcontractors.On the property side, we might discuss the district's potentialcourse-of-construction issues as the buildings are erected.
From the responses to its RFP, a public entity typically selectstwo or three agencies to make oral presentations. When we'reinvited to make a presentation, we send a team of people, typicallyincluding our claims and risk management specialists. To betterunderstand the prospect and to make a stronger case for ourselves,we try to have a conversation with the participating publicofficials, rather than simply responding to their questions. Afterthe oral presentations, the public entity selects its agent ofrecord. Knowledge and experience tend to be the determining factorsin their choice.
If we're selected, we begin gathering the information we need toapproach the insurance markets. Submissions for public entitiesresemble those of any other commercial insurance account, althoughthere are some differences in emphasis. Obtaining a current,accurate statement of values for the typical public entity's largeinventory of real and personal property is a very important task.In the public sector, there also are some fairly lengthy liabilityquestionnaires which they need to complete.
Schools, cities and counties all have different exposures, and theinformation-gathering process can be fairly intensive. We prefer tohave four months after we're selected as agent of record to preparesubmissions and secure coverage, but we often have considerablyless time. Thanks to our size, experience and relationships withunderwriters, however, we can expedite coverage placement whennecessary.
In negotiating with the markets, we often partner with privateinsurance carriers and/or reinsurers, particularly for largerclients that have significant self-insured retentions. For others,we may obtain coverage from self-insurance “pools,” many of whichwere formed in response to insurance crises such as the hard marketof the 1980s. They've done a lot to help stabilize insuranceavailability for governmental organizations and are a veryimportant risk finance vehicle for our customers.
In Oregon, we're fortunate to have three strong, well-managedpools: City County Insurance Services, formed by the League ofOregon Cities and the Association of Oregon Counties; SpecialDistricts Insurance Services, which was created by the SpecialDistricts Association of Oregon; and Property and Casualty Coveragefor Education, which was created jointly in 2006 by the OregonSchool Boards Association and the Special Districts Association ofOregon. We do considerable business with all three.
Delivering service
One of the most important services we provide clients is helpingthem compare their performance against various industrybenchmarking surveys. One such survey, published jointly by PRIMAand the Public Entity Risk Institute, compares the participants'overall cost of risk (insurance premiums, retained losses, internaladministration and various outside services–typically expressed forpublic entities as a percentage of the total operatingbudget).
We also benchmark their insurance rates per exposure unit. The mostimportant benchmark could well be claims cost and frequency by lineof coverage. If, for instance, a client's auto liability claimfrequency is higher than the norm for other public entities of itstype and size, the exposure obviously becomes one to target withloss-prevention initiatives.
Public entities are subject to a wide variety of liability claims,from routine slips and falls to allegations of faulty road designor negligent playground supervision. That's why another importantservice we provide is claims management. Our claims manager, basedin our Portland office, formerly ran a major insurer's claimoperations in 37 states. Because many of our clients self-fund asignificant portion of their liability losses and the associatedadjustment expenses via self-insured retentions, our claimsadjusting and auditing expertise is extremely important tothem.
We also can arrange to provide training for our clients on numeroussafety and risk management topics. For larger public entities withtheir own risk management departments, we can provide structuralrisk management consulting to identify any weaknesses and suggestimprovements. Perhaps the most important service we render issimply helping clients prioritize their risk management efforts inpursuit of their fundamental goal: minimizing their overall cost ofrisk.
Specialty-specific coverages
Like most commercial accounts, public entities purchase the typicalproperty and liability coverages, although a few are specific tothis niche. For all entities, public official errors and omissionsinsurance is one of the most important of these coverages. Amongother things, it responds to employment practices allegations.Given that the employment practices area is one of the most highlylitigated areas of the law, it deserves our special attention. Sobesides arranging appropriate coverage under the public officialsE&O policy, we provide clients with EPLI “best practices”checklists, which are available from a number of sources. Lawenforcement liability insurance is another vital professionalliability product for practically all counties andmunicipalities.
Public entities typically own a great deal of mobile constructionor road-building equipment that needs to be scheduled for liabilityinsurance purposes under the CGL policy. They also have specialvehicles like fire trucks that, for property purposes, may be bestinsured on inland marine forms.
Liability limits need to be chosen wisely. Different states affordpublic entities different amounts of sovereign immunity from tortclaims, so we must research a state's tort claim acts beforeadvising public entities about limits. It's also important to keepin mind that the state tort claims statutes don't addressconstitutional rights claims, so this exposure falls outside anystate tort cap limitation statute. Employment practices claims,incidentally, are almost always based on alleged violations ofconstitutional rights.
A stand-alone foreign travel policy can be important coverage for aschool district. Such policies provide not only insurance but alsotoll-free phone numbers to call for emergency assistance, providingpeace of mind to faculty and staff accompanying students onschool-sponsored trips abroad.
Coverage for volunteers is also important for schools. This can bearranged by ensuring that volunteers are included in the namedinsured in a school district's CGL policy. Similar to publicofficials E&O insurance, school leaders E&O is a keycoverage for those in the education field. The named insuredprovision is usually broad and applies to both faculty and schooladministrators. As does public officials E&O, the schoolleaders E&O policy responds to employment practicesclaims.
Many of our public entity clients, particularly the larger ones,compensate us on a fee basis. (Under Oregon law, a public entitymust pay at least $100,000 in annual property-casualty premiumsbefore it's eligible to obtain insurance on a fee basis.) Otherscompensate us with traditional commissions. The Oregon Dept. ofConsumer and Business Services and its Insurance Division haveclear rules pertaining to fee contracts, and we have stronginternal controls to make sure that we adhere to them.
Our public entity team's book of business is more heavily weightedtoward fees than commissions, which I think is entirelyappropriate. “Full disclosure” should be the norm in the publicsector, and fee contracts make an agency's compensation completelytransparent.
Coping with the renewal rush
Coverage for most Oregon public entities comes up for renewal onJuly 1, in accordance with the start of their fiscal year. So we'reextremely busy in the spring, preparing for July 1 renewals andnew-business presentations. We start planning for this period inJanuary and meet at least every two weeks to make sure that ourinternal procedures and controls are functioning as theyshould.
Stability is important for our public entity clients. Cities,school districts and other governmental organizations must operatewithin budgets, usually with limited ability to alter them. Afterreceiving tax disbursements, they have little opportunity to raiseadditional funds. Public entities rely on their agents forinformation on the direction of insurance markets and to keep theirrisk cost in check. We do our best to give our public entityclients a good night's sleep through great coverage, competitivepricing and the best service available. Ron Graybeal, CPCU, ARMis managing director and public entity practice leader forJBL&K Risk Services LLC, and independent agency with more than$400 million in premium volume in Portland, Ore. JBL&K is asubsidiary of Beecher Carlson Insurance Services LLC, a privatleyheld broker based in Atlanta. Mr. Graybeal can be contacted at[email protected].