2.5. ERMUSR 03-13-2013 Elk River .M
Municipal Utilities
13069 Orono Parkway
P.O. Box 430
Elk River, MN 55330
(763) 441-2020
UTILITIES COMMISSION MEETING
TO: FROM:
Elk River Municipal Utilities Commission Theresa Slominski—Finance Director
John Dietz, Chair
Daryl Thompson,Vice Chair
Allan Nadeau, Trustee
MEETING DATE: AGENDA ITEM NUMBER:
March 19, 2013 2.5
SUBJECT:
Resolution—Insurance Agent of Record Services
BACKGROUND:
We have been with our current Insurance Agent of Record, Liberty Insurance Agency, formerly
First National Insurance, for over twenty years. For due diligence, we partnered with the City
and put out for bid these insurance services.
DISCUSSION:
We received proposals from nine different agents and a committee consisting of Cal Portner,
Tim Simon, Lori Ziemer, Lauren Wipper, John Cunningham, and myself reviewed the proposals
and selected four agents to interview. We interviewed on Friday, March 86 and the committee's
final selection for an agent is Northern Capital Insurance Group due to their research,
recommendations, experience and price. At the interview this agent clearly demonstrated their
experience in the field and with the League of Minnesota Cities in discussing their understanding
of our insurance as it exists today and wanting to make recommendations for claim management
and cost reduction in the future. This firm's fee is significantly less than our current agent, and
we are hopeful there will be premium reductions realized as well.
ACTION REQUESTED:
Staff requests approval of attached resolution for Insurance Agent of Record, contingent on the
City Council approval Monday, March 18`h, 2013.
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ATTACHMENTS:
• City of Elk River's Memo to the City Council
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1REQUEST FOR ACTION
River
To ITEM NUMBER
Mayor and City Council
AGENDA SECTION MEETING DATE PREPARED BY
Consent March 18, 2013 Tim Simon, Finance Director
ITEM DESCRIPTION REVIEWED By
Appoint Insurance Agent of Record Cal Portner, City Administrator
REVIEWED BY
ACTION REQUESTED
1. Approve by resolution the appointment of Northern Capital Insurance Group as the Insurance
Agent of Record for July 1, 2013 through June 30, 2018.
2. Authorize the Mayor and City Clerk to execute the city's standardized professional services
agreement and any other documents related to the Insurance Agent of Record.
BACKGROUND/DISCUSSION
With the League of Minnesota Cities Insurance Trust (LMCIT), the City of Elk River must have an
insurance agent of record. On January 22, 2013, the City Council authorized staff to issue a Request for
Proposals (RFP) for professional insurance agent of record services for the renewal year of July 1, 2013
through June 30, 2018 (5 years).
Proposals were due at 4:00 p.m., on March 8 and nine proposals were received. Two proposals were
received after the deadline and were not considered. City and Elk River Municipal Utilities staff reviewed
the proposals and the four highlighted firms were interviewed by the committee: Arthur J Gallagher,
Bearence,RJF, Northern Capital Insurance Group.
Base Proposal for
Insurance Firm 5 years*
Arthuri. Gallagher $ 80,000
North Central Insurance Agency $ 155,150
Bearence $ 73,000
Proverus $ 150,000
RJF $ 110,000
Oakwood Insurance Agency $ 238,910
Northern Capital Insurance Group $ 62,500
*Base proposal includes City and ERMU
NCIA proposed commission,RFP required fixed fee
The four firms interviewed with a committee comprised of the Finance and Assistant Finance Directors,
Fire Chief who facilitates the city's safety and loss control program, HR Representative who facilitates the
city's workers compensation program, and ERMU Finance Manager. The committee based its review of
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the firms on compliance with mandatory elements, municipal experience, expertise, customer service,
transition approach,quality of interview responses and made a recommendation to the City
Administrator.
As the City Council is aware,under state statute, the selection of an insurance firm is considered a
professional service. The purpose of this process is to select the firm that will provide the most value to
the city, not just in terms of costs.
Below are some of the reasons why Northern Capital Insurance Group was selected:
• The fee is the lowest of the nine proposals
• Fee includes workers compensation analysis, not an extra charge
• Transition phase includes physical and photographic audit of all facilities and equipment
• Had done their research about the City and Utilities for the interview
• Many city clients
• Outlined a multi-year trend analysis for deductible recommendations example
FINANCIAL IMPACT
Staff prepared the RFP to include a compensation system based on an annual fee rather than a
commission. The annual fee will be paid directly by the city to the firm. Previously, the commission was
included in the cost of the premium and paid by the LMCIT to the insurance agent of record. Staff
believes switching from commission-based to fee-based services provides greater budget certainty and
transparency.
Over the past three years, with a commission rate of 7.5% for property/casualty and 2% for workers
compensation, the amount paid by the city and ERMU was:
2012 - $33,361 Year City ERMU Total
2011 - $29,682 2014 $ 9,000 $ 3,500 $12,500
2010 - $29,733 2015 $ 9,000 $ 3,500 $12,500
2016 $ 9,000 $ 3,500 $12,500
The chart to the right shows Northern Capital's proposed fees 2017 $ 9,000 $ 3,500 $12,500
for services. The city and ERMU will see substantial savings 2018 $ 9,000 $ 3,500 $12,500
over the next 5 years. Total $45,000 $ 17,500 $62,500
Regarding the savings, the committee felt it was important to invest some of the savings to enhance our
safety and wellness programs. The fire chief is reviewing the program and will bring recommendations to
the council to review later in the year or in the 2014 budget.
ATTACHMENTS
• League memo on "The Agent's Role and Compensation in LMCIT"
• Resolution appointing Northern Capital Insurance Group as insurance agent of record
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RESOLUTION 13-2
A RESOLUTION OF ELK RIVER MUNICIPAL UTILITIES
A RESOLUTION APPOINTING INSURANCE AGENT OF RECORD FOR
LEAGUE OF MINNESOTA CITIES INSURANCE TRUST
WHEREAS, the League of Minnesota Cities Insurance Trust (LMCIT) requires cities to
use the services of an agent in order to participate in the LMCIT
property/casualty program; and
WHEREAS, the Utilities Commission has reviewed and considered the written materials
from LMCIT discussing the agent's role and compensation in LMCIT; and
WHEREAS, Northern Capital Insurance Group has agreed that they are willing to provide
to the city and utility the services listed below under the terms and conditions
listed below; and
NOW, THEREFORE, BE IT RESOLVED THE FOLLOWING:
Appointment
1. Elk River Municipal Utilities hereby appoints as its agent for purposes of the city's
participation in the LMCIT property/casualty and workers' compensation programs.
Northern Capital Insurance Group
Term: five (5 years)
2. This appointment shall remain effective until June 30, 2018.
Compensation
3. As compensation for the services provided to the utility as described in Paragraph 4
below, the utility will pay to the agent a fee of$3,500 annually. The utility hereby
directs LMCIT not to include any allowance for an agent's fee in quoting and billing
the utility's premiums for property, liability, and automotive coverage and to refund
the two percent workers' compensation coverage agent fee allowance to the city.
Services
4. The agent will perform the following services:
a. Advise and assist the city in assembling and accurately reporting underwriting
data,including updating property values, for rating purposes.
b. Advise and assist the city in evaluating and selecting among coverage alternatives
such as deductibles, limits, optional coverages, and alternative coverage forms,
etc.
c. Review coverage documents and invoices to assure coverage has been correctly
issued and billed.
d. Advise the utility on potential gaps or overlaps in coverages.
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e. Assist the utility as requested in submitting claims and interpreting coverage as
applied to particular claims.
f. Review loss reports for correct reporting, appropriate reserves, etc.
g. Assist as requested with safety and loss control activities.
h. Assist the utility in identifying risk exposures and developing appropriate
strategies to address those exposures.
Passed and adopted this 19th day of Match 2013.
John J. Dietz, Chairperson
ATTEST:
Tina Allard, City Clerk
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