HEREFORDSHIRE Council’s insurance premiums have increased by more than 100 per cent with the rise driven by public liability claims over the past two years.
The council’s current long term insurance agreements expire at the end of this month. By then, a closed doors cabinet level decision will have placed policy business worth around £1 million a year for the next five years with four firms.
If not, the council will be left without cover having no certificate of insurance.
Property damage and public liability contribute to over 90 per cent of the council’s overall premium spend.
A draft assessment report warns the council that it needs to be confident of claims not exceeding its risk tolerance limit.
The number of public liability claims was stable up until around 2009-10 but there has been a sharp increase since.
Much of that increase is due to pothole claims that - in 2012-13 alone – made up £250,000 of the total incurred.
Variance in incurred totals ranges from £156,000 in 2002-03 to £1.2 million on 2009-10.
Ahead of the current agreements expiring, the council has been conducting an insurance tendering exercise with its brokers Marsh.
Senior council officers from finance, property, procurement and insurance (through Hoople) have been involved in preparing specifications and reviewing the tenders.
Marsh recommended placing contracts for cover with four firms - AIG, HSB, Zurich Municipal and QBE.
If approved, the new arrangements are estimated to make £13,000 worth of savings in the first year.
The council’s previous approach to insurance has been to focus on low risk and generous cover, resulting in low excesses and proportionately higher premiums in exchange for a reduced exposure to policy excesses.
However, the present insurance market means this approach is no longer cost effective.
This has led to a new approach of increasing excess values and reviewing the level of cover provisions.
It is against this background that premiums have increased significantly by over 100 per cent, particularly in the last two years for public liability, partly driven by the council’s worsening claims record.
The national picture shows insurers generally less willing to provide cover for local authorities as claims rise as a result of service and budget cuts.
No win, no fee has also made an impact.
There was little market interest in the council’s tender with only two full responses received.