2010-11-24 CC Packet - Laserfiche WebLink

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� Police liability is the second biggest liability loss cost area for LMCIT (21 percent). These costs are volatile from year to year and have been nearly as costly as land use litigation costs in recent years. The higher costs in recent years are largely due to a relatively small number of • expensive claims. Overall, the numbers of golice liability claims we see hasn't changed much. • Employment liability (14 percent) and sewer backup liability (11 percent) are also major pieces of LMCIT's liability loss costs. Except for a spike in employment liability costs in 2006 due to two specific claim situations, this area has been fairly sta.ble both in the number and the cost of claims. Sewer liability, on the other hand, is a very volatile loss area. Although loss costs have been stable in recent years, the September flooding has generated quite a few sewer backup claims for 2010. For other coverages (i.e. auto, machinery breakdown, liquor, etc.), rates will either be flat or down for the coming yeaz, reflecting the claims experience in those areas. It is because of the good loss experience in these other areas that help offset some of the increased costs for land use and police liability. Property rates are calculated to reflect average loss rates over many years. The longer-term loss pattern has on average been fairly stable and a little less than projected, which is why LMCIT was able to reduce rates 4 percent this year. However, property costs can vary significantly from one year to the next. The recent storms are a good example of this. As those claims develop, they could produce higher-than-expected property damage, which could affect rates for the future. LMCIT will continue to try and keep rates as stable as possible to avoid sudden shock increases in costs for cifies. Background on WC Rates I I • Indemnity cflsts have tracked wage inflation fairly closely. 1n addition, the frequency of work- related injuries and claims has continued to decrease and the number of claims involving ; indemnity payments has steadily declined. Medical costs continue to rise faster than wage inflation, however, and are the driving factor in workers' compensation rates. In fact, these costs are expected to increase about nine percent per year and now make up 60 percent of LMCIT's total worker's compensation loss costs. Unless and until medical costs level off, these costs will continue to put pressure on workers' compensation premium rates every year. At this point, the most important thing cities can do to help keep premium rates down is to continue reducing the number of employee injuries through good loss control, safety and return-to-work practices — it's really the best tool we have to control future premium costs. Because LMCIT takes a conservative approach to rate setting, the workers' compensation program's finances are strong. This allows LMCIT to keep rates as low as possible from year to year. The rate reduction for 2011 provides a balance between keeping rates as low as possible and maintaining LMCIT's long-term financial strength. If you have questions or comments, feel free to contact the LMCIT underwriting department at 651-281-1200 or 800-925-1122. • 3