Preserving Educational Budgetsby Reducing Insurance Costs:Creating Your Own Insurance Company
Presented by:Jim Blumreich, Chief Financial Officer
Northeast Wisconsin Technical College
Steve Stoeger-Moore, Executive Vice President
Districts Mutual Insurance
Education ExposuresProperty &
contentsAthleticsStudent healthEmployeesAutoShop and labsD&OFiduciary liabilitySexual harassment
Hiring/firingTransportationResidence hallsCollectiblesForeign travelEmployee
dishonesty/crimeBusiness travel
accident
History
Group program preceded DMI◦ Created by 6, eventually grew to 15 colleges
Developed “trust” of working together◦ Spread the risk◦ Cooperative environment developed◦ Laid the groundwork
Large enough exposure base to bargain as a group◦ No individualized loss control◦ Pay the premium, we’ll pay the claims◦ Group buying, no special services◦ Coverage gaps
History
Trust paid out $26M, $5M in losses◦ 22% loss ratio◦ Premium increases were double digits◦ Budget impact
Intent to control risk management◦ Often neglected – especially at small
institutions
Champions
Timeline
1984• G
roup program started
2002• 1
5 of 16 colleges in group program
2003• S
eptember - Consultant & actuary study
• December – Board resolutions to join DMI
2004• J
anuary - Certificate of authority approval process
• July – DMI began operations
Keys to Success
Consultant• Recommende
d structure• Potential cost
savings• Create
municipal mutual under WI statutes
Actuary• Study
supported financial success
• Potential cost savings
Support• CFOs• Presidents• Boards• OCI
Coverage Issued
Coverages not noted are covered by WTCS Trust program
Workers Compensation
(Rating done by WI Compensation Rating Bureau)
Property
CasualtyEquipment Breakdown
Campus Violent Acts
Program Retention Levels
$225,000 Company Retention
$25,000Member Deductible
$350,000,000Excess
Including TRIA and Inland Marine
Property
$5,000 Member Deductible
General Liability
$345,000 Company Retention
$4,650,000Reinsurance
$5,000 MemberDeductible
$100,000 Member Deductible
$25,000Member Deductible
Auto Liability ELLBoiler & Machinery
Work Comp
$345,000 Company Retention
$100,000,000 BoilerReinsurance
$4,650,000Reinsurance
$350,000 Company Retention
$4,650,000Reinsurance
$250,000 Company Retention
Statutory Reinsurance Work Comp
$250,000 Company Retention
AircraftWork Comp
$3,000,000Reinsurance
Statutory Reinsurance Work Comp
$650,000X/S $350,000
Reinsurance
Organization
Consultant Legal Counsel
Actuary
Board of Directors
Executive Vice PresidentAccountant
Auditor
BrokerBank
Ancillary CoveragesForeign LiabilityFidelity Bond CrimeBusiness Travel Accident
Administrative
Support
ClaimsRisk & Loss
Control Consultant
Property, Casualty & Workers Compensation ProgramCoverages: Equipment Breakdown - Educators Legal -
Property & Machinery / Inland Marine - General Liability - Commercial Auto - Workers Compensation - Campus
Violent Acts
FundingYears 1-3
• Premiums• Artificially
-rated policies (except w/c)
• Paid same as year prior to DMI
• Capital = residual of premium minus expenditures
Year 4
• Premiums• Rates
held steady
• Exposure-based (except w/c)
• Capital = $1.5M
Benefits
Tangible
•Did not borrow to create DMI•$7.6M surplus•Close coverage gaps•Consistent policy limits•Best practices•Focus on loss control•Preserve budget•Services•DMI website (www.districtsmutualinsurance.com)
Intangible
•Services•Loss control, risk management education, hot topics
•Reduced local staff time•Networking•Attitude•Control•Risk management awareness•Company owner – skin in the game
Worker Compensation
FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 100.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
Modification Factor History
Max Median Min
Where Do We Go From Here
Loss contr
ol effort
s
Investments
-leverage our surplu
s
Increased retention
levels =
decreased
reinsurance
premiums
Rating
Return capital
Pay dividends
Pay member premium
s
Other produ
cts
Awards & Recognition
2004
•CCBO
2005
•GFOA Best Practices
•Community College Futures Assembly Bellwether finalist
2006
•Published in PRIMA
2007
•URMIA Innovative Risk Management Solutions finalist
2008
•Exec VP won Risk Innovator in Higher Education award
SummaryReduce insurance costs by creating
your own insurance company
Resources◦ Champion◦ Feasibility funding
It can be done!
Presentation handout available on ACCT website.
Thank You
Jim Blumreich Steve Stoeger-Moore
Northeast Wisconsin Technical College
Chief Financial Officer
920.498.5701
Districts Mutual Insurance
Executive Vice President
605.422.2655
Questions?