By RJ Impastato, A.R.M. —
Nearly 90% of municipalities with populations below 50,000 will experience sharp revenue declines tied to the coronavirus, according to survey data released by the National League of Cities and the United States Conference of Mayors.
When searching for budget expenses to trim, your insurance program is a great place to start. But before making any cuts, municipal boards should consult with an expert in municipal insurance to ensure their communities are covered for all their unique operations. Nothing will ruin a municipal budget faster than a claim that’s not covered by your insurance program.
Key to intelligently “right sizing” your municipal program is having a seasoned municipal insurance broker benchmark your current insurance against similar-sized municipalities. A comprehensive benchmark analysis will include comparing your municipality’s deductibles, limits, coverages and exclusions to neighboring municipalities with a similar population and operations.
Completion of the benchmark analysis will lead you to ask pertinent questions like:
- Should you raise deductibles on coverages where you’ve had only a few (or no) claims in recent years?
- Are you buying higher coverage limits than you need and have never even come close to using?
Take your auto insurance program: Do you still need physical damage coverage on a 14-year-old owned vehicle or is liability coverage alone sufficient? Municipalities in New York and New Jersey pay some of the highest auto insurance premiums in the country, averaging double the amount paid by cities like Dallas. Dropping physical damage coverage on all your older vehicles will produce significant savings.
Some other insurance coverages that municipalities should be aware of are:
This month the New York Workers’ Compensation Rating Board introduced a new workers’ compensation classification code, “Telecommuter Reassigned Employees” (Code 8873), which has the same low rate as your clerical staff. Municipalities can reduce their workers’ compensation costs by applying Code 8873 to employees who would normally travel to their jobs, such as engineers, but have been told to work from home because of the pandemic.
Municipalities should make sure they are adequately covered for cyber extortion. Since so many employees are working from home, often using unsecured Internet connections, cyberattacks have increased. Throughout the pandemic crisis, cybercriminals have stepped up attacks on remote workers, sending phishing emails that download crippling malware onto crucial IT systems, demanding huge ransom payments to restore operations.
Are you buying flood coverage even though your community is in a 500-year flood plain? Flood insurance makes sense if your municipality is along the coast or in a low-lying area. Who can forget how the storm surge from Hurricane Sandy flooded parts of lower Manhattan and the New Jersey Coast in 2012? But the properties most affected were in 100-year flood plains. A community located farther inland or at a higher elevation may not need flood coverage.
Earthquake insurance is another coverage that most communities along the East Coast should consider doing without. Seismic activity is relatively rare on the East Coast compared to the Western United States.
What’s important is knowing how much these coverages are costing so you can determine if they can be cut from your program.
The legal doctrine of sovereign immunity that once barred individuals from suing governmental entities no longer shields municipalities. Today, if someone is injured on municipal property, or by a municipal employee, they will often sue the municipality for bodily injury, including pain and suffering. You’ll want to confirm that your liability insurance provides full protection from such claims but doesn’t serve as an attractive “deep pocket” for an opportunistic plaintiff’s lawyer to target.
Your municipality performs financial audits annually. The Covid-19 pandemic is the perfect opportunity to conduct an insurance audit and reduce your municipality’s insurance costs. A broker who specializes in insuring municipalities can conduct a comprehensive audit and benchmark analysis that will lower your total insurance premiums while ensuring your insurance program is tailored to meet your community’s unique needs.