R2008-157 AUTHORIZING AGREEMENTS WITH TRAVELERS PUBLIC SECTOR, HELMSMAN MANAGEMENT SERVICES & GALLAGHER BASSETT SERVICES

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DEPARTMENT OF FINANCIAL MANAGEMENT RISK MANAGEMENT DIVISION MEMORANDUM NO. 2008 - 092 DATE: September 10, 2008 TO: Honorable Mayor Michael Carrigan and City Council FROM: John Smith, Interim City Manager Ron Neufeld, Director of Financial Management� Scott Clark, Risk Man��/ v� SUBJECT: PROPERTY & CASUALTY SELF-INSURANCE RENEWAL � SUMMARY RECOMMENDATION: Staff recommends that City Council approve Arthur I� J. Gallagher and Company and Gallagher-Bassett Services for renewal of the City's property and casualty self-insurance program, effective October 1, 2008. BACKGROUND: At the last Council meeting held on September 2, 2008, staff was directed to request supplemental proposals from the three companies that had previously submitted proposals. The supplemental request was to allow companies to provide quotes for liability insurance with retention levels of $50,000 and $100,000. All three companies provided supplemental proposals that included the retention levels of $50,000 and $100,000. The three companies are: Behnke and Company, an agency in Decatur; Dimond Brothers Insurance Agency, Inc., a local agency in Champaign; and the incumbent Arthur J. Gallagher and Company, a national brokerage firm. Attached are finro spreadsheets called `Gallagher Cost for $150,000 SIR vs. Behnke Cost for $50,000 SIR' and `Gallagher Cost for $150,000 SIR vs. Gallagher Cost for $50,000 SIR'. Those two spreadsheets demonstrate what the premium cost difference for the two different retention levels would have been; and based on the City's loss history, if that premium cost difference would have resulted in any savings. The finro spreadsheets show that by purchasing the $150,000 retention level the City did enjoy a cost savings over the past ten years. The cost savings on the Gallagher vs. Behnke spreadsheet is $1,050,525, and on the Gallagher vs. Gallagher spreadsheet, the savings is $486,082. Choosing a retention level is based on the loss history and on the premium costs for the various retention levels. If there is significant premium savings by purchasing the higher retention level and the loss history shows no significant losses, then the better option is to purchase the insurance with the higher retention level.