2013-12-11 CC Packet - Laserfiche WebLink

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Premium Rates The rate changes taking place this year don't mean members' actual premiums will necessarily increase or decrease by these exact amounts. Actual premiums are also affected by changes in city expenditures, property values, payrolls, other exposure measures, and experience rating. Property /Casualty Apart from rate decreases in the optional liquor liability and excess liability coverages, members with renewals on or after November 15, 2013 will see flat rates on average. When LMCIT sets premiums rates, the average experience over the past several years is used to project how much loss to expect in the future. The generally flat rate changes for the coming year are in part the result of lower- than - average property and land use litigation losses in recent years. This, combined with steady losses in the areas of sewer backups, auto liability, auto physical damage, and other minor liability loss areas, have offset the increased loss projections for employment and police liability. Aside from the overall rates, members will see some changes related to the new liability premium rating system, which went into effect for renewals on or after November 15, 2012. LMCIT is still in the process of fine- tuning the new system after one year of lessons learned. Following are the changes that will take effect for renewals on or after November 15, 2013. Changes to the New Liability Premium Rating System • Liability premium increases /decreases. Last year, some members saw their liability, auto liability and no -fault sewer backup premiums go up and some go down because of the way the new liability system more equitably allocates premium costs among all members. To avoid shock premium changes, premium increases for each of these lines were capped at 30% (50% for drug task forces) and premium decreases were capped at 10 %. For the second year of transition, members will again see premium increases capped at 30% (50% for drug task forces), but the decrease constraint will change to 20 %. LMCIT projects it will be nearly fully transitioned to the new liability rating method by the start of the 2014 -15 underwriting year. • Liability rate relativity adjustments. The relativity adjustments recognize changes in loss patterns from one year ago as well as a better understanding exposure unit estimates for each of the liability classes, which are: police officers, full time equivalent employees, households, sewer connections, and annual expenditures. The changes in liability class relativities are in the table below. These changes are designed to produce the same total amount of premium as the current rates, but to better allocate the premium costs to the exposures that are generating the loss costs. Note part of the reason the employment and expenditure rates are decreasing for the 2013 -14 underwriting year is because LMCIT had under estimated what the actual FTE and city expenditure figures would be when developing rates for the 2012 -13 underwriting year. Liability Class Rate Change % of total liability premium 2012 -2013 2013 -2014 Police (FTE officers) +18% 22% 26% Employment (City FTEs) -8% 18% 16% Land use (Households) +14% 18% 21% Sewer (Connections) +19% 13% 16% All other (Annual expenditures) -21% 26% 21 2 Page