HomeMy WebLinkAbout1/5/2000 - STAFF REPORTS (2) I C,,f
DATE: January 5,2000
TO: City Council
FROM: Insurance Subcommittee
INSURANCE BROKERAGE SERVICES CONTRACT-AON
RECOMMENDATION:
It is recommended that City Council approve a Professional Services Agreement with AON Risk
Services for Insurance Brokerage Services for a three(3)year period at$75,000 per year.
BACKGROUND:
Six(6)months ago, the City Manager established an Insurance Subcommittee made up of both
Assistant City Managers,the Police Chief j the Fire Chief and an OMB representative. The charge
ofthe subcommittee wasto independently,through aRequest forProposalprocess,find aninswance
broker to provide for our Property, Liability and Workers Compensation Insurance needs. The
proposals received were evaluated, not on lowest flat fee,but rather on the greatest potential for
overall risk savings to the City. Through that process,the subcommittee ranked AON Risk Services
as the best brokerage firm to meet the City's needs and at the November 3, 1999, City Council
meeting,staff was authorized to negotiate a contract.
This selection signals a switch from insurance acquisition via a commission system to acquisition
via a fixed fee. The annual fee of $75,000 does exceed last year's $52,000 in commission.
However,this entire process was undertaken to find a way to an unbiased recommendation on the
best way to cover Workers Compensation. Previous brokers offered the idea of First Dollar
Coverage(buying insurance to cover all expenses without a deductible)as the best solution, at a
premium of between$1.25 million and$1.4 million. Underthel0%commission industry practice,
such a policy would reap a $125,000 to $140,000 commission which,when added to last year's
$52,000,would far exceed the Brokerage Service Fee under this contract.
Under the proposed contract and flat fee, AON will evaluate all alternatives for Workers
Compensation coverage,provide a study ofthe issue and recommend the best approach for the City
and their recommendation will not be clouded by the possibility of a$125,000 commission.
One of the other reasons why the subcommittee unanimously recommended AON is their vast
experience in California municipal insurance. They are one ofthebiggestbrokerage firms providing
municipal insurance and because of their size and experience are able to evaluate the City's
insurance programs,bundle insurance needs and adjust coverages and deductibles to save the City
dollars in overall insurance costs.
To fiuther delineate the services that will be provided under the contract,attached is the Scope of
Services from the contract,as well as the AON"Response to Brokerage Service Attachment."
The Insurance subcommittee unanimously recommends City Council approval of the contract. A
Minute Order is attached for City Council consideration.
& A
AtdN F.SM06T,AAE
EXHIBIT"A"
SCOPE OF SERVICES
Contractor shall provide Property,Liability and Workers'Compensation Insurance Brokerage Services per
Request for Proposal(RFP)02-00,per the Contractor's proposal dated July 16, 1999,and per the following
itemized work items:
A. Working onbehalfofthe City ofPahn Springs,California,Contractor shall solicit insurance and risk
management proposals from qualified carriers and third party administrators, and evaluate and
recommend the most effective risk financing programs. Each time there is a renewal of a financing
program,Contractor shall further provide City with a copy of all bids, including the name of each
insurance company,amount of the bid and details regarding coverages encompassed within the bid.
Contractor is to review various risk financing strategies including the City's current program and
should include first dollar,self insured retention or deductibles,loss sensitive programs or programs
including the services of an"unbundled"third party administrator. Contractor shall work with the
City staff,as applicable,and shall prepare a project time line,develop a marketing strategy;make
presentations; and implement the program to include negotiations with carriers, third party
administrators,and other appropriate parties.
B. The Contractor shall develop project time lines and shall be available according to time lines
coordinated with,and acceptable to City for planning, review, presentations,and implementation
meeting prior to the expiration date of the policies due for renewal. All recommendations for
coverage shall include comprehensive competitive prices from the insurance market. Summaries
shall include insurance company, price quoted, Best's ratings, limits, deductibles and important
exclusives.
C. Following a 90 day startup period, Contractor shall provide assistance to the City's Risk
Management and Human Resources staff in the enhancement and improvement of a loss sensitive
premium allocation system.
D. Contractor shall assist City staff in the development and maintenance of contractual insurance
standards and provide advice as to the appropriate types and levels of coverage necessary for
proposed contracts.
E. Contractor shall review invoices received from carriers,to assess accuracy,initiate billing activity,
and resolve accounting differences or discrepancies.
F. On behalf of the City,Contractor shall issue binders and insurance certificates of coverage,request
endorsements from carriers and issue identification cards for automobile insurance.
G. Contractor shall analyze insurance market trends and report in advance on the effect the trends will
have on pricing and coverage availability and shall make appropriate recommendation so that City
may take advantage of said trends.
H. Contractor shall provide training services to City staff on insurance and risk management topics.
I. Contractor shall provide routine verbal consulting advice on safety and loss control matters as they
relate to the City's risk management program. In addition,Contractor shall carry out on-site risk
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assessment inspections of at least one third ofthe City's facilities annually and develop and provide
training programs to reduce said risks.
J. Within 270 days of contract commencement, Contractor shall advise the City in setting up an
effective comprehensive Employee Safety Program.
K. Contractor shall assist the Human Resources Director in the audit of Workers' Compensation
classification coding and Workers' Compensation claims files.
L. Contractor shall maintain frequent contact with claims personnel to follow the progress of claims
management activities,remain abreast of loss development,assist in resolving problems/conflicts
regarding claims administration issues.
M. Contractor shall assist the Risk Manager by spot auditing the Property and Liability claims files with
an eye toward correct reserving practices.
N. Within 180 days ofoontract commencement,Contractor shall perform a complete analysis of City's
current Workers' Compensation Program and report and recommend as to the most effective
program for the City's consideration. Contractor would assist in Request for Proposal development
for a third party administration ifthe recommended approach is in that direction and if City Council
accepts that recommendation.
O. Meet with City's Management on a semiannual basis to review overall risk management program.
P. Work with City's Police Chief, Fire Chief, Airport Director and Facilities Director to develop a
driver training program that addresses the needs of the City. 'Then,provide said driver training to
City drivers all within 365 days of Contract Agreement.
Q. Act as primary Safety Committee contact, conduct a review of all safety incidents and accident
reports, conduct quarterly meetings with City's Safety Committee to discuss incident trends and
solutions.
R. Issue quarterly written performance reports to City's Management within 30 days ofthe end of each
quarter.
EXHIBIT"Cl,
SCHEDULE OF COMPENSATION
For each year ofthe Agreement,Contractor shall be paid a flat fee of$75,000. Said fee shall be paid in three
equal installments in January,May and September ofeach year. Contractor to provide an invoice at least 30
days prior to required payments.
Should the City elect to accept one or both ofthe renewal options,said fee shall continue at$75,000 per year.
EXHIBIT"D"
SCHEDULE OF PERFORMANCE
Services under this contract shall be provided in a timely fashion so the City has at least 20 days to review
all bids and recommend insurance placements. Specific service time lines called out in Exhibit"A",Scope
of Services,shall be adhered to.
By February 28 of each year,Contractor shall advise City of the major training effort to be undertaken by
Contractor in that contract year.
I Brokeresponse to
Description Service Cost Service Provider= Estimated Comments
Included Hours
1. Market the city's account to contracted carriers and Yes Market Specialists
available brokerage markets
2. Assist in the preparation of materials,statements of
values,specifications and underwriting data Market Specialists, a V
required by insurers. This includes working with Yes producer a e
the City to gather necessary information.
3. Verify the accuracy and adequacy of all binders, to
policies,policy endorsements, invoices,claims Market S ialists, `� E
runs and other insurance-related documents prior to Yes A. =
delivery. Obtain revisions in such documents when Account Manager o c
netceded. v v,
4. Issue binders,certificates of insurance,
identification cards for automobile insurance and Yes Account Manager -5 3 Z
other coverage verifications documents as required.
5. Assist the City in modifying coverages including
drafting manuscript endorsements when changes in Market Specialists, g
operations occur and assure all enhanced coverage Yes bg
endorsements available from the insurer are Account Executive d Q
provided to the City.
Are services and cost of services included rn flat fee proposed? Respond with Yes or No.
21rubcale fservrce will be provded by producer,account executive,CSR or other(identrfyJ.
A Response to Request for Proposal for the City of Palm Springs
II
I
4
6 Attend monthly Safety Committee Meetings and Yes Loss Control H
quarterly Risk Management meetings at City Hall Professional
7 Obtain answers to the City's coverage questions
.when broker is agent on the account. Coverage g c Z ;
questions on other client policies may also be Yes Account Executive d `
brought to broker's attention for review and
opinion o t •
8 Respond to staff s questions regarding insurance
coverages and related issues whether or not these w = e
questions relate to the City's policies through Yes Account Executive W o
. v o
broker. g = v
9 Work with City staff to improve individual s e
department's premium allocation loss sensitivity
Yes Account Executive V
10 Submit originals of all City policies with duplicate vas i
originals or full copies to others Yes Market Specialists v� Z
I I Review insurance-related documents prepared by c ` +
City staff►o ensure clarity,correctness and Yes Account Executive G a i
appropriateness. aU m
0
12 Assist the City in identifying, measuring, Account Executive, s
monitoring and reducing loss exposures Yes
Loss Control d g E •
Professional F > 0
A Response to Request for Proposal for the City of Palni Springs
iy
13. Re%iew Insurance Services(ISO)and other rating
services or insurer rate promulgation work sheets Yes Loss Control �
and sprinkler surveys with City staff. Professional
14. Advise the city as to improvements in how values 3
are to be reported to insurance companies.
Interface with staff as necessary to determine what Yes Account Executive c
types of values should be developed for insurance _y
purposes. d .
•— E
15. Review contracts and lease agreements for hold- c
harmless and indemnification clauses and Yes Account Executive c
insurance requirements. Q Q
16. Prepare and present a formal annual report to the c
City detailing the status of the insurance programs, Yes
Executive,
activities and accomplishments in previous year producer d
and plans and goals for the coming year.
17. Prepare a formal insurance manual for the client. X V
Content should be discussed with Risk Manager ' = d
prior to creating the manual to ensure that it meets Yes Account Executive 10 a -S
the City's needs. s
19. Prepare insurance policy summaries containing c • a
provisions, limits,conditions and terms of all Yes Account Executive o y
policies. a E fib!
19. Assist the City by either calculating or verifying C
General Liability premium changes due to new Yes Account Executive
contracts or changes in exposures. v
A Response to Request for Proposal for the City of Palm Springs Am
i
a-
20 Assist the Citv through the audit procedure
process For those insurers the client utilizes,you
hill take responsibility for verifying and correcting E
audits. For audits on insurance policies where Yes Account Executive Z o
broker is not the agent,you will review the audits J
on as requested basis,and provide your u Q
professional opinion to the City.
21 Assist the City in preparing proofs of loss or claims m
reports Yes Account Executive o `u t •
22 Assist in obtaining loss settlements from insurers Yes Account Executive O 3 v
23 Maintain a five-year property loss history. This W d d
shall include a list of losses incurred under each '>
insurance policy or a statement that no losses have Yes Account Executive r N
been incurred c
24. Prepare a periodic analysis of losses which H 'E
emphasizes trends and problem areas,and advise Yes Account Executive, •` rn
how these enewal postures affect the City's costs and Market Specialists a c
25 Provide copies of all loss control reports(prepared o T
by insurance companies or other service providers), au H
and review recommendations and other Yes Account Executive , = d •
information contained therein with the Risk a
Manager € 3 0
A Response to Request for Proposal for the City of Palm Springs Aw
Respoiise to Broker Service Attachment
26. Assist the City with a Driver Safety Training Account Executive, o e
program. Insist on insurer's assistance in working yes Loss Control
with the City on these programs. a v Q "
Specialist . 0 o
27. Coordinate loss prevention inspections between the g o
City and the insurer. Coordinate all parties and Yes Loss Control 9 .0 €
monitor the performance in loss control service Professional
— 3 5 8
programs
28. Attend loss control meetings when possible and
assist the City with the enhancement of its loss e c
control program. Be a proponent of active loss o
control. Facilitate the relationship between City yes Loss Control
personnel and insurance company loss control Professional e
r8ptesentatives,ifnecessary. £ .£
d
� io na
A Response to Request for Proposal for the City of Palm Springs
Aon Risk Services, Inc.
Insurance Brokerage Service
AGREEMENT #4188
CITY OF PALM SPRINGS M06551, 1-5-2000
CONTRACT SERVICES AGREEMENT related
THIS CONTRACT SERVICES AGREEMENT(herein"Agreement'),is made and entered
into this�day of January 2000,by and between the CPTY OF PALM SPRINGS,a municipal
corporation, (herein "City') and AON RISK SERVICES, INC., a California corporation (herein
"Contractor'). (The term Contractor includes professionals performing in a consulting capacity.)
The parties hereto agree as follows:
1.0 SERVICES OF CONTRACTOR
1.1 &D a of Cervices, In compliance with all terms and conditions of this
Agreement, the Contractor shall provide those services specified in the "Scope of Services"
allwbed hereto as Exhibit „A" and incorporated herein by this reference, which services may be
referred to herein as the "services" or "work" hereunder. As a material inducement to the City
entering into this Agreement, Contractor represents and warrants that Contractor is a provider of
fast class work and services and Contractor is experienced in performing the work and services
contemplated herein and, in light of such status and experience, Contractor covenants that it shall
follow the highest professional standards in performing the work and services required hereunder
and that all materials will be of good quality, fit for the purpose intended For purposes of this
Agreement, the phrase "highest professional standards" shall mean those standards of practice
recognized by one or more first-class firms performing similar work under similar circumstances.
1.2 Vnntractnr's Pmnnaal The Scope of Service shall include the Contractor's
proposal or bid which shall be incorporated herein by this reference as though fully set forth herein.
In the event of any inconsistency between the terms of such proposal and this Agreement, the
terms of this Agreement shall govern.
1.3 Compliance with T aw, All services rendered hereunder shall be provided in
accordance with all ordinances, resolutions, statutes, rules, and regulations of the City and any
Federal, State or local governmental agency having jurisdiction in effect at the time service is
rendered.
1.4 T.ic_enae y Permits Fear and Assessments. Contractor shall obtain at its sole
cost and expense such licenses, permits and approvals as may be required by law for the
Performance of the services required by this Agreement. Contractor shall have the sole obligation
to pay for any fees (except surplus lines fees, provided such fees do not include any form of
commission and are strictly limited to actual costs of booking or processing passed through from
the underwriter), assessments and taxes, plus applicable penalties and interest, which may be
imposed by law and arise from or are necessary for the Contractor's performance of the services
required by this Agreement, and shall indemnify, defend and hold harmless City against any such
fees,assessments,taxes penalties or interest levied,assessed or imposed against City hereunder.
1.5 Familiarity with Wn* By executing this Contract,Contractor warrants that
Contractor(a)has thoroughly investigated and considered the scope of services to be performed,(b)
has carefully considered how the services should be performed, and (c) fully understands the
- 1 -
Jan Truscott
From: Galante, Fred[fgalante@rutan.00m]
Sent: Wednesday, January 05, 200012:43 PM
To: Jan Trusoott(E-mail)
Subject: AON Risk Services Agreement
-U
AM serVIM • j
AgreenentOM pear Jan:
Attached is a copy of the risk services agreement which is set for tonlghrs
council meeting for consideration. I have discussed some changes with their i
attorney and have revised the services agreement,which is attached.
Also,Al Smoot has the Exhibits to the Agreement The only chance that ha_
needs to make is to Exhiblt"A" after the first sentence Pa ranh Ate
new sentence "Eac time there is a renewal of a
f nancing program, Contra or sTall further provide City with a copy of all
bids, including the name of each the insurance company, amount of the bid
and details regarding coverages encompassed within the bid."
TFhaannk you, and please call me if you have any questions.
<<AON Services Agreementdoc>>
1
MINUTE ORDER NO. l
APPROVING A PROFESSIONAL SERVICES
AGREEMENT WITH AON RISK SERVICES FOR A
THREE YEAR PERIOD WITH TWO ONE YEAR
OPTIONS AT A COST OF$75,000 PER YEAR.
I HEREBY CERTIFY that this Minute Order, approving a Professional
Services Agreement with AON Risk Services for a three year period with
two one year options at a cost of$75,000 per year,was adopted by the City
Council of the City of Pahn Springs,California,in a meeting thereof held
on the 51 day of January 2000.
PATRICIA A. SANDERS
City Clerk