HomeMy WebLinkAboutResolution - 2107 - Agreement - Wyatt Company - Risk Management Services - 08_08_1985Resolution #2107
August 8, 1985
Agenda Item #32
RESOLUTION
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK:
THAT the Mayor of the City of Lubbock BE and is hereby authorized
and directed to execute for and on behalf of the City of Lubbock an
agreement and associated documents between the City of Lubbock and
the Wyatt Company of Dallas for risk management services including
insurance evaluation and development of alternative programs and
preparation and evaluation of insurance bids, which agreement
is attached hereto and which shall be spread upon the minutes of the
Council and as spread upon the minutes of the Council shall constitute
and be a part of this Resolution as if fully copied herein in detail.
Passed by the City Council this 8th day of August _ 1985.
ALAN Y MA OR
ATTEST:
Ranette Boyd, City Secretary
APP VED AS TO FORM:
Robert Massengale, As . City Manager/Financial Services
APPROVED AS TO CONTENT:
G. Vandiver, Asst. City Attorney
AIA. EMPLOYEE BENEFITS
COMPENSATION PROGRAMS
EMPLOYEE COMMUNICATIONS
ADMINISTRATIVE SYSTEMS
RISK MANAGEMENT
INTERNATIONAL SERVICES
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Mr. Gene Eads, C.P.M.
Purchasing Manager
City of Lubbock
1625 Thirteenth Street
Room L-04
Lubbock, Texas 79401
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THE GL�/G COMPANY
ACTUARIES AND CONSULTANTS
1900 REPUBLICBANK TOWER
325NORTH ST. PAUL STREET
DALLAS, TEXAS 75201
(214) 979-3800
Re: Risk Management Consultant
Dear Mr. Ead s:
June 18, 1985
Resolution #2107
Proposal for Liability Insurance - RFP # 8608
OFFICES IN PRINCIPAL CITIES
AROUND THE WORLD
We appreciate being asked to provide a proposal to evaluate the City's
Liability Insurance Program and also to write bid specifications including
potentially an evaluation of such bids. In line with your request for a
proposal, RFP # 8608, we submit the following.
PHASE I: INSURANCE EVALUATION AND DEVELOPMENT OF ALTERNATIVE LIABILITY
PROGRAM
The objectives of this phase will be:
To identify any areas in the insurance and risk management program, or its
administration, where significant cost reductions can be realized through
restructuring the program, self-insurance, use of alternative insurance
markets, elimination of unnecessary coverages, or changes in administrative
procedures.
To identify any inadequacies in the insurance and risk management program
in terms of policy limits, coverage, policy conditions, or administration
of the program should such inadequacies exist.
To aid the City in the streamlining of its insurance and risk management
program and its administration, in the interest of efficiency and effec-
tiveness.
To provide assurance to the City that in all respects, in addition to those
identified above, that the insurance and risk management program is effec-
tively administered;- and appropriate to the City's needs.
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To achieve these objectives, we will:
Provide an independent and unbiased report to management of the adequacy,
comprehensiveness and appropriateness of the risk management and insurance
program now in force, and make recommendations as to those modifications of
that program that would appear to be in the interest of the City at this
time or in the immediate future.
Examine certain aspects related to administration of the risk management
program, and report on the effectiveness of that administration, and any
ways in which it can be improved. Examples of what is included here will
be a review of the City's attention to risk management controls in its con-
tracts and leases, and how its property insurance values are established.
SCOPE OF STUDY
In the interest of providing a clear and comprehensive explanation of the ele-
ments that would be included in a study of this type, we have divided Phase I
into two parts:
PROGRAM REVIEW AND AUDIT
This part of the assignment will include:
1. Identification of the exposures of the City to accidental types of
loss, excluding normal business risks.
This will involve the City providing us with information we
request (such as a financial report, policy copies, completion of
an exposure questionnaire, claim history, etc.) that will permit
an identification of significant loss exposures present in the
City's activities services and operators.
2. Examination of the possibility of elimination of loss exposures, or
significant reduction of such exposures, and the practicality of such
elimination or reduction. This element will not encompass detailed
inspections or cost/benefit analysis, but will approach problems on the
basis of a general overview.
The overview will seek to identify areas with the potential for
practical application of programs designed to eliminate or miti-
gate frequency or severity of loss.
3. Determination of the most appropriate and least costly method of hand-
ling each exposure - i.e., commercial insurance, self-insurance, hold
harmless agreements, etc.
This will involve examination of current risk financing practices
and comparison of these practices with other alternatives which
appear to be advantageous and cost-effective and which also appear
to be consistent with the City`s insurance management philosophy.
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THE (� ilal COMPANY
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This examination will take into account such things as the size of
the City, premium base by line of insurance, self-insurance capa-
bility, previous loss history, etc.
4. Analysis of the existing insurance policies and evaluation of:
- The adequacy and comprehensiveness of protection afforded by them.
- The competitiveness and adequacy of premiums and rates.
- The services provided by present carriers.
- The financial stability of the insurance carriers involved, to the
extent currently published information permits such an evaluation.
5. Determination of the modifications of the present insurance which
including such matters as:
- Changes to or from self-insurance (or in the amount of self-
insurance);
- Purchase of additional insurance;
- Changes in deductible levels;
- Changes in rating plans;
- Elimination of unnecessary coverages;
- Consolidation of coverages;
- Amendment of policy terms and conditions;
- Reconsideration of systems of valuation;
- Changes in practices regarding insurance requirements from lessees,
suppliers, or contractors.
This step involves final review of all information assembled and
analyzed in the preceding parts of the analysis. It has, as its
primary objective, the coordination of a cost-effective risk man-
agement program, utilizing self -retention capability, contractual
transfer of risk, broad commercial insurance protection, and effec-
tive application of risk management and insurance services.
PHASE II: PREPARATION AND EVALUATION OF BID SPECIFICATIONS
Carrying out a competitive bid renewal of the City's program is a logical and
usual extension of the audit and review work. It permits adoption and pricing
of many of the recommendations which result from the audit and review.
This phase of the assignment is to assist in the bidding and renewal of the
insurance program of the City using the, following assumptions:
The following will be included:
General Liability
Automobile Liability
Umbrella Liability
Public Official Liability
Police Professional Liability.
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OBJECTIVES
To assist the City in securing an insurance program tailored to its
needs at the most reasonable cost based on our review of City exposures,
risks, needs and current coverage.
To provide certainty that the resulting insurance program is placed
through capable insurance intermediaries with insurance companies quali-
fied to provide the coverage and services required by your organization.
• To provide further certainty that the placement of the insurance program
is accomplished on a basis which will reflect favorably on your organi-
zation in terms of professionalism and fairness in its dealings with the
insurance community.
. To streamline the bidding process in the interest of efficiency, effec-
tiveness, and minimization of the administrative burden on your organi-
zation.
Basic Work Plan
Prepare specifications for the City's insurance and risk management program
and provide assistance in soliciting bids.
SCOPE
Preparation of written specifications and exposure data for quotation on
insurance and as approved by you.
This step will ensure that all carriers presenting proposals for
your insurance coverage are going to follow your specifications and
bid on a program meeting your needs in a manner which will make a
meaningful comparison possible. It will also ensure that each
carrier is using the same exposure and loss information, so the suc-
cessful bidder will not be in a position to justify deviation from
their proposal based on alleged lack of information. Adequate
allowances will be granted to carriers to improve on the specified
coverage if they choose, but such departures can be evaluated, and
every bidder's basic program should be the same. For some coverages
the specifications will ask for quotes for alternative amounts of
insurance and deductibles so that these can be evaluated.
Carry out an allocation of insurance companies among the competing
agents to avoid difficulties in the obtaining of the most competitive
bids.
Insurance companies are very sensitive to multiple requests for pro-
posals on the same account and tend to react negatively to such
requests - possibly to the extent of not giving anyone a quotation,
demanding written letters of authority designating one broker, giv-
ing everyone the same quote, or possibly only quoting to the first
THE (W/111 rr)k4PGNV
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agent contacting them (allowing some aggressive brokers to tie up
the insurance marketplace). Wyatt suggests some procedures in the
assignment of insurance companies which are very practical, and are
generally accepted as fair and equitable by the insurance commu-
nity. These tend to give every agent or broker authorized by the
client a fair shot at the account, eliminate confusion in the mar-
ketplace and increase the interest of the insurance community in
bidding on your account.
. Answer any inquiries regarding specifications.
Almost inevitably there are questions which arise after the release
of specifications and exposure information. We stand ready to
answer these questions, and to assure all involved that no one is
discriminated against in the process of answering the questions.
. Evaluation of Bids
This part of the assignment will consist of a written evaluation of
the bids. This evaluation will include a comparison of cost and
coverage, point out improvements in protection, comment on the
financial and underwriting, ratings of the insurance companies, and
on compliance by the agents with stipulated Agent's Errors and
Omissions insurance requirements.
Typically, the above will complete a bidding assignment. Some clients wish to
retain Wyatt beyond completion of the bid evaluation. For example, they may
wish to have the policies reviewed after receipt to be sure they are issued as
promised. We would be happy to check policies for compliance with specifica-
tions, if that is desired, or to carry out additional work that may be reques-
ted by the City. Such additional work can be either on a flat hourly basis or
on a lump sum basis, as may be mutually agreed upon between Wyatt and the
City.
INFORMATION NEEDED
To undertake this assignment and obtain renewal proposals, we will need to be
furnished with the following:
1. A complete copy of all present policies (including policy jacket,
basic form and all endorsements), plus the current annual premium.
2. Completion of Applications for Public Officials Liability, Police Pro-
fessional Liability, EMS & Medical Professional Liability, General
Liability, Airport and Hangarkeepers Liability.
3. A current schedule of motor vehicles to be insured showing the
description (year, make, model, etc.) and rate classifications. This
should be available from your current policy (or agent).
THE `�!/i�"al COMPANY
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4. For General Liability and Auto Liability, please provide copies of
loss runs or loss summaries showing for each of the past three years:
a. Total claims for each class (AL and GL; show both total incurred
and total paid;
b. Total allocated claims expense; and
c. A separate summary showing by year and class the individual claims
with a value in excess of $25,000.
Also provide for each year:
a. Total payroll;
b. Total revenue;
c. Total number of vehicles.
5. Provide a separate summary of total incurred claim amounts, for all
other coverage lines, for the past three years:
a. Public Officials Liability; and
b. Law Enforcement Liability.
6. A copy of the City's most recent Annual Financial Report.
7. Copies of a sampling of City contracts (not to exceed five), such as
leases, construction of new facilities, professional services, etc.
8. A current projection of annual payroll by workers compensation classi-
fication and rates.
TIME SCHEDULE
INSURANCE AND RISK MANAGEMENT EVALUATION
We are prepared to begin work on this assignment within one week of receiving
notification from the City to proceed. We would have our report drafted with-
in 30 days of receiving the policy copies and other initially requested infor-
mation. Our procedure is to then give you time to read through the report
draft, note your questions and comments, and then to have a discussion meet-
ing. After this meeting, we would make whatever report changes or modifica-
tions as might be appropriate and provide you with a finished report.
COMPETITIVE BIDDING
The competitive bidding requires a longer time span to complete. We have
enclosed a tentative time table showing the steps (and time requirements)
involved in carrying out a typical competitive bid renewal.
THE vk?11Y// rnKA P A N V
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CITY OF LUBBOCK
TENTATIVE TIME TABLE
Competitive Bid Insurance Renewal
(Six Weeks) Wyatt and City to prepare underwriting information and appli-
cations. Wyatt to write bid specifications and submit draft
to City for review.
(Two Weeks) City to review specifications. Appropriate changes, if any
to be made.
(Two Weeks) City to advertise bids.
Bid specifications to be released to interested agents.
(One Week) Agents to submit list of insurance companies they wish to
work with.
(One Week) Wyatt to advise agents of insurance companies they are
authorized to obtain quotes from.
(Five Weeks) Agents to prepare bids.
Bids to be submitted to City and Wyatt.
(Two Weeks) Wyatt to prepare analysis and report of bids received.
(Two Weeks) City to review Wyatt report and recommendations and make
award of coverage.
Award of coverage to be made.
Agent to provide binders confirming coverage by 1 week prior
to effective date.
Effective date of new program.
QUALIFICATIONS
The Wyatt Company was established in 1943 as a pension and employee benefits
consulting firm. Since that time, The Wyatt Company has grown into the lar-
gest independent consulting firm nationally and internationally specializing
in risk management, insurance, employee benefits, pension planning, compensa-
tion, actuarial and other related consulting services. Wyatt has fifty
offices worldwide, of which twenty-seven are located throughout the United
States. We are owned by our active employees and have no ownership or
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affiliation with insurance carriers, agents or brokers. We do not sell or
place any insurance. We do not believe that a consulting firm can ensure
objectivity unless it maintains this independence and separation from poten-
tial conflicts.
Public entities are our largest class of clients. This extensive experience
gives us solid background and know how in dealing with the special problems
faced by governmental bodies as well as sound knowledge of the specialized
coverages they need. As an indication of our expertise, Wyatt has the
endorsement of the International City Management Association to carry out risk
management consulting for municipalities. No other risk management consulting
firm has such an endorsement.
PROJECT TEAM
For a study of the type under consideration, The Wyatt Company's practice is
to make use of a project team. We find this a preferable approach (compared
to using only one individual), particularly considering the comprehensiveness
of the desired scope of work.
The team we propose is made up entirely of consultants with solid backgrounds
in various disciplines. Both of the consultants shown for this proposed
assignment have considerable experience in insurance and risk management for
public entities:
Project Manager Arthur E. Parry, CPCU
Consultant Judson L. Hobby, ARM.
Resumes on these consultants are enclosed. These consultants have worked on
assignments for many public entities. During the past year, Mr. Hobby has
been involved in consulting assignments for twenty-one different public enti-
ties. Mr. Parry has worked on assignments for public entities throughout the
Southwest.
Please see attached.
REFERENCES
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FEE BASIS
In the conduct of this assignment, we will act solely in a consulting and
advisory capacity. We do not act as insurance brokers, and will not receive
any commissions in connection with your insurance, or remuneration from any
source other than the fee charged to you for our professional services. As
with most other professional firms, we charge for our services on the basis of
hours worked and the hourly billing rate of our staff involved in conducting
this study. Our fee for the work described would be:
Phase I - Evaluation of Existing Program ............. $5,400
Phase II - Developing Alternative Liability Program ... $2,900
Developing Bidding Specifications .......... $2,900
Evaluation of Bids and Recommendations ..... $2,900.
The above fees include two visits to Lubbock (an initial visit to gather
required information, a second visit to discuss the audit and evaluation
report draft and proposed bid specifications). Additional visits requested by
the City would be at our prevailing hourly rates (which range from $525 - $950
per day plus out-of-pocket expenses).
We are very pleased to have been called upon to submit this proposal and look
forward to the opportunity to be of service to the City of Lubbock. If this
proposal is found to be acceptable, please sign the enclosed copy and return
it to us as authorization for this study. Acceptance of the proposed competi-
tive bidding assignment may be deferred until completion of the audit assign-
ment, if that approach is preferable by the City.
Sincerely,
THVWYATT/ 02 ANY
r �arry, U
Manager
Risk Management Services
AEP:abp
Attachment
ACCEPTED BY:
DATE: August 8, 1985
THE OeiiGlal COMPANY