Over the years, our agency has discovered that if there is one phrase that sums up our approach to business, it would be “specialization through team expertise.” We serve all types of specialty clients, including contractors, nonprofit organizations and dentists. My particular specialty is public entities: I devote most of my time to meeting the unique insurance and risk management needs of school districts, municipalities, counties, special districts and other tax-supported entities. In Oregon, we're proud to serve as agent of record for approximately 120 public entities, including roughly 25 percent of Oregon's public school districts.
To best serve these clients, we created a public entity team that includes dedicated staff members in three Oregon offices: Portland, Eugene and Medford. This team includes a full-time public entity risk manager with more than 25 years of experience. We also have an account executive (producer/handler) in each office, as well as dedicated support staff. I am one of our account executives in the Portland office, managing our statewide practice, developing additional supply by attendance at carrier council meetings and other carrier expansion activities, interfacing with a wide variety of risk management resource “suppliers,” and handling larger accounts. Our parent company now brings us specialized risk finance resources 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, public entities business is based on relationships. Public officials must be able to trust our integrity, knowledge and expertise, and the only way to build that trust is face to face. Consequently, our account executives spend a lot of time in the field. We're also active in the Public Risk and Insurance Management Association (PRIMA)–our staff both attends and sponsors its functions, and we've spoken at its national meetings and at those of its Oregon state chapter.
Because of our more than 50 years' involvement in the public-entity niche, our marketing efforts are more than targeted-they're “lasered.” Instead of routinely issuing monthly newsletters for clients and prospects, we issue more timely updates as needed.
For instance, we published a newsletter last December explaining the implications of the Oregon Supreme Court's ruling in Clarke v. Oregon Health Sciences University. This decision made it clear that public entity employees, if not public entities themselves, could in some cases be liable for substantially higher damages than the Oregon Tort Claims Act's $200,000 total cap on economic and noneconomic damages. On another occasion, we published a newsletter that addressed public entities' responsibilities for protecting information about private individuals.
Responding to RFPs
One particular area where all this relationship building really pays off is in the RFP process. In Oregon, public entities choose their insurance agent by the request for proposal process rather than by simply letting bids. Although there is no legally mandated interval between RFPs, public entities typically issue them every three to five years.
We're usually not notified when a public entity is going to issue an RFP. Rather, it's incumbent on our account executives to stay in touch with the public entities, so they'll be aware of such opportunities when they arise. (Of course, we also respond to RFPs issued by current clients.)
In an RFP, a public entity does not seek specific insurance proposals, but looks primarily for a demonstration of agency capabilities. Our reply to an RFP takes the form of an information packet that outlines the services we can provide–e.g., customized loss control programs–and references from existing clients. This response is not cobbled together from “boilerplate,” but painstakingly tailored to the exposures and experience of the public entity issuing the RFP.
Here is where we realize the benefits from all the time our account executives spend in the field. Suppose, for instance, that a school district in a rapidly expanding area is building new facilities to keep up with demand. Our reply to its RFP might address the contractual risk management issues faced by the district and how best to transfer liability risks to contractors and subcontractors. On the property side, we might discuss the district's potential course-of-construction issues as the buildings are erected.
From the responses to its RFP, a public entity typically selects two or three agencies to make oral presentations. When we're invited to make a presentation, we send a team of people, typically including our claims and risk management specialists. To better understand the prospect and to make a stronger case for ourselves, we try to have a conversation with the participating public officials, rather than simply responding to their questions. After the oral presentations, the public entity selects its agent of record. Knowledge and experience tend to be the determining factors in their choice.
If we're selected, we begin gathering the information we need to approach the insurance markets. Submissions for public entities resemble those of any other commercial insurance account, although there are some differences in emphasis. Obtaining a current, accurate statement of values for the typical public entity's large inventory of real and personal property is a very important task. In the public sector, there also are some fairly lengthy liability questionnaires which they need to complete.
Schools, cities and counties all have different exposures, and the information-gathering process can be fairly intensive. We prefer to have four months after we're selected as agent of record to prepare submissions and secure coverage, but we often have considerably less time. Thanks to our size, experience and relationships with underwriters, however, we can expedite coverage placement when necessary.
In negotiating with the markets, we often partner with private insurance carriers and/or reinsurers, particularly for larger clients that have significant self-insured retentions. For others, we may obtain coverage from self-insurance “pools,” many of which were formed in response to insurance crises such as the hard market of the 1980s. They've done a lot to help stabilize insurance availability for governmental organizations and are a very important risk finance vehicle for our customers.
In Oregon, we're fortunate to have three strong, well-managed pools: City County Insurance Services, formed by the League of Oregon Cities and the Association of Oregon Counties; Special Districts Insurance Services, which was created by the Special Districts Association of Oregon; and Property and Casualty Coverage for Education, which was created jointly in 2006 by the Oregon School Boards Association and the Special Districts Association of Oregon. We do considerable business with all three.
Delivering service
One of the most important services we provide clients is helping them compare their performance against various industry benchmarking surveys. One such survey, published jointly by PRIMA and the Public Entity Risk Institute, compares the participants' overall cost of risk (insurance premiums, retained losses, internal administration and various outside services–typically expressed for public entities as a percentage of the total operating budget).
We also benchmark their insurance rates per exposure unit. The most important benchmark could well be claims cost and frequency by line of coverage. If, for instance, a client's auto liability claim frequency is higher than the norm for other public entities of its type and size, the exposure obviously becomes one to target with loss-prevention initiatives.
Public entities are subject to a wide variety of liability claims, from routine slips and falls to allegations of faulty road design or negligent playground supervision. That's why another important service we provide is claims management. Our claims manager, based in our Portland office, formerly ran a major insurer's claim operations in 37 states. Because many of our clients self-fund a significant portion of their liability losses and the associated adjustment expenses via self-insured retentions, our claims adjusting and auditing expertise is extremely important to them.
We also can arrange to provide training for our clients on numerous safety and risk management topics. For larger public entities with their own risk management departments, we can provide structural risk management consulting to identify any weaknesses and suggest improvements. Perhaps the most important service we render is simply helping clients prioritize their risk management efforts in pursuit of their fundamental goal: minimizing their overall cost of risk.
Specialty-specific coverages
Like most commercial accounts, public entities purchase the typical property and liability coverages, although a few are specific to this niche. For all entities, public official errors and omissions insurance is one of the most important of these coverages. Among other things, it responds to employment practices allegations. Given that the employment practices area is one of the most highly litigated areas of the law, it deserves our special attention. So besides arranging appropriate coverage under the public officials E&O policy, we provide clients with EPLI “best practices” checklists, which are available from a number of sources. Law enforcement liability insurance is another vital professional liability product for practically all counties and municipalities.
Public entities typically own a great deal of mobile construction or road-building equipment that needs to be scheduled for liability insurance purposes under the CGL policy. They also have special vehicles like fire trucks that, for property purposes, may be best insured on inland marine forms.
Liability limits need to be chosen wisely. Different states afford public entities different amounts of sovereign immunity from tort claims, so we must research a state's tort claim acts before advising public entities about limits. It's also important to keep in mind that the state tort claims statutes don't address constitutional rights claims, so this exposure falls outside any state tort cap limitation statute. Employment practices claims, incidentally, are almost always based on alleged violations of constitutional rights.
A stand-alone foreign travel policy can be important coverage for a school district. Such policies provide not only insurance but also toll-free phone numbers to call for emergency assistance, providing peace of mind to faculty and staff accompanying students on school-sponsored trips abroad.
Coverage for volunteers is also important for schools. This can be arranged by ensuring that volunteers are included in the named insured in a school district's CGL policy. Similar to public officials E&O insurance, school leaders E&O is a key coverage for those in the education field. The named insured provision is usually broad and applies to both faculty and school administrators. As does public officials E&O, the school leaders E&O policy responds to employment practices claims.
Many of our public entity clients, particularly the larger ones, compensate us on a fee basis. (Under Oregon law, a public entity must pay at least $100,000 in annual property-casualty premiums before it's eligible to obtain insurance on a fee basis.) Others compensate us with traditional commissions. The Oregon Dept. of Consumer and Business Services and its Insurance Division have clear rules pertaining to fee contracts, and we have strong internal controls to make sure that we adhere to them.
Our public entity team's book of business is more heavily weighted toward fees than commissions, which I think is entirely appropriate. “Full disclosure” should be the norm in the public sector, and fee contracts make an agency's compensation completely transparent.
Coping with the renewal rush
Coverage for most Oregon public entities comes up for renewal on July 1, in accordance with the start of their fiscal year. So we're extremely busy in the spring, preparing for July 1 renewals and new-business presentations. We start planning for this period in January and meet at least every two weeks to make sure that our internal procedures and controls are functioning as they should.
Stability is important for our public entity clients. Cities, school districts and other governmental organizations must operate within budgets, usually with limited ability to alter them. After receiving tax disbursements, they have little opportunity to raise additional funds. Public entities rely on their agents for information on the direction of insurance markets and to keep their risk cost in check. We do our best to give our public entity clients a good night's sleep through great coverage, competitive pricing and the best service available. Ron Graybeal, CPCU, ARM is managing director and public entity practice leader for JBL&K Risk Services LLC, and independent agency with more than $400 million in premium volume in Portland, Ore. JBL&K is a subsidiary of Beecher Carlson Insurance Services LLC, a privatley held broker based in Atlanta. Mr. Graybeal can be contacted at [email protected].