Property Insurance and Wisconsin Counties
The property insurance marketplace for Wisconsin public entities was once relatively non-existent. The Local Government Property Insurance Fund (LGPIF), run by the state, offered low rates and deductibles with which the commercial insurance marketplace couldn’t compete. The LGPIF was created in 1911 and at its peak insured 1,183 public entities in the state, however, starting in 2009 a series of precipitating events caused a sharp decline that would eventually lead the LGPIF’s future to become in jeopardy.
In 2009 the Wisconsin legislature deemed the LGPIF’s surplus excessive and required it to refund $12 million to policyholders in the form of dividends. Over the next couple of years, the LGPIF experienced record claim frequency and severity statewide and endured the Milwaukee County courthouse fire, leading to a dwindling surplus.
Governor Walker’s 2015-17 budget called for a gradual end to the LGPIF by rescinding renewal offerings in after December 2015. The legislature’s Joint Finance Committee amended Walker’s budget action and recommended reinstating the LGPIF, but attached numerous contingencies such as raising rates and deductible offerings. In the 2017-19 budget, Governor Walker has again recommended closing the LGPIF by ceasing policy issuance after July 1, 2017 and ceasing renewals after December 31, 2017. This means the LGPIF would no longer accept new claims after January 1, 2019 – and exist only to pay current claims. The Joint Finance Committee and legislature will either accept or amend the governor’s proposed budget measure this summer.
Because of the initial rate and deductible increases in 2015, 83 percent of policyholders have since turned to the commercial marketplace or municipal mutual alternatives like the Wisconsin County Mutual Insurance Corporation (County Mutual).
The County Mutual Responds
In 2015, after the governor’s initial proposal to cease operations of the fund, the County Mutual began forming a property insurance program for Wisconsin public entities to ensure continuation of the cost effectiveness and broad coverage of the LGPIF. Shortly thereafter, the County Mutual board of directors authorized the company to begin issuing policies effective September 1, 2015 and attain the goals of:
• Providing a long-term property insurance solution
• Providing a pricing structure that is substantially at-cost
• Structuring a broad-based coverage format similar to the LGPIF
• Building flexibility to respond to each member’s unique exposures
• Minimizing overall budget impact
• Providing innovative risk management initiatives for programmed maintenance, trending building solution and education on emerging construction techniques
• Structure and monitor an effective claim process
The County Mutual realized the need to create as contiguous a transition as possible from the LGPIF. Thus, the company designed a broad coverage form, closely mirroring the coverage offered by the fund. Learning from some of the mistakes that led to the LGPIF’s eventual decline, the County Mutual took a conservative approach in its rate and deductible offerings with the goal of creating a long-term, cost-effective solution for property insurance. Additionally, the company has taken an intensive approach to adjusting property claims and avoid being an “open checkbook” for claim reimbursement.
The Commercial Marketplace
The commercial marketplace saw the LGPIF’s decline as an opportunity to gain market share for 2016 renewals by offering unsustainable rates and deductibles. Already in 2017, slowly increasing rates are beginning to shine a light on the instability that comes with the commercial marketplace. Additionally, commercial insurers require an onerous underwriting process that can prove to be a burden on your staff.
Since issuing the first policy in 2015, 35 counties have turned to the County Mutual’s property insurance solution. With growth on the horizon, the County Mutual is dedicated to providing an at-cost program that ensures a conservative and stable rate to lessen future budget impact.
Property Risk Management
Continuing the company’s dedication to risk management and loss control, the County Mutual has work diligently to create a Property School. In conjunction with construction, engineering and restoration companies, the Property School’s goal is to educate buildings, grounds, and maintenance staff on preventive maintenance, emerging building techniques and materials, and identifying physical property hazards.
To further alleviate the transition from the LGPIF, the County Mutual has also partnered with property risk management and valuation firm Assetworks to provide its AMP program to members to maintain property via an online portal by submitting property additions, deletions and changes throughout the policy year. The Assetworks partnership will also involve a full-scale valuation project for all members in 2018.