5.8. SR 09-07-2004 - Laserfiche WebLink

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FIRST NATIONAL INSURANCE AGENCY 812 MAIN STREET ELK RIVER, MN 55330 763-441-2500 August 23, 2004 Ms. Lori Johnson, Finance Dir. City of Elk River 13065 Orono Parkway Elk River, MN 55330 Dear Lori: Re: League of MN Cities Insurance Trust Renewal Options 2004-2005 Policy Term The Council Members requested some additional information with regard to the Options we presented last week at the council meeting. We have discussed these options, and agree on at least some of the recommendations, but I wanted to outline each with some comments or clarification for benefit of the council members and for your records. A copy of these "Options" is attached for your reference. 1) $2~500 Deductible. The quoted savings for this policy term is $14,690. I have reviewed the claim history, with special attention to the recent three-year history, and a general review of five-year history. As a rule of thumb, a three to five year claim history is consistent with what commercial underwriters require when considering new accounts, pricing, etc. Over the most recent three-year history, the City would not have saved premium cost by changing to $2,500 deductible. In fact, there would have been an additional cost of about $2,000. Two out of these three years were "good" years with low frequency and low claim costs. The third year, however, was not so good - there were 14 claims, which would have cost a total of about $16,700 over and above the assumed deductible of $1,000. Considering a five-year period, the results look more favorable to select the $2,500 Deductible Option. We cannot arrive at exact premium savings figures for each of the five years, as we have made coverage changes, a deductible change in 2002, but can make some reasonably "educated" assumptions. It appears that the City would have save premium expenses in four out of the last five years.