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More Dist. 861 Budget Woes
Insurance bills bigger next year
by Cynthya Porter
School board members grappled with more financial woes Thursday
as Garry Watts from Winona Insurance Agency informed them that
insurance premiums would nearly double for the school district
next year.
Covering property and liability insurance for the district, rates
will jump from $121,995 during 2001-2002 to $$225,391 for 2002-2003,
Watts said.
The district's former insurer, St. Paul Insurance Company, will
drop the school district from its client roster in July, Watts
said, as it no longer plans to insure school districts.
The only bid received to replace insurance coverage came from
Berkley Risk Administrators, a company Fiscal Affairs Director
Jeff Seeley said is endorsed by the School Board Association
and holds the largest share of school district policies in the
country.
Berkley's bid came in 84% higher than this year's premium, prompting
several board members to balk at the increase.
"This is ludicrous," said board member Todd Rasmussen.
"We could self-insure. We could borrow four million dollars
and insure ourselves to the same level we have here at less than
$100,000 a year, and you're asking us for a premium of $225,000."
Seeley stated that the district didn't have funds available for
self-insurance, and that such borrowing would require a referendum
unless the district could show annual savings offsetting the
output.
"What about a letter of credit?" Rasmussen, an area
bank official, asked. He explained that a letter of credit could
be opened through an area bank, from which the district could
withdraw funds in the event of a claim. "On behalf of the
school district, I'm going to look into a letter of credit,"
Rasmussen said. "I know it's going to be a lot of money,
but it is not going to be $225,000."
Seeley reiterated, "The district is not in a position to
self-fund," prompting board member Steve Kranz to ask if
there were any cost-lowering programs the district could engage
in to lower premiums.
According to Watts, there are steps a district can take to lower
insurance costs, but the school board is pressed for time, as
a new carrier must be secured by July 1.
"We have no time when you come to us two weeks before we
have to make a decision," Rasmussen said. "I will
not support payment of this." "It sounds like we're
sort of over a barrel," said board member Sharon Erickson
Ropes.
Seeley responded that the timing was out of their control and
that the administration acted promptly when they learned the
district would lose its insurance carrier.
Board member Ed Thompson expressed concern over the use of Berkley,
citing former problems with the company when the district was
affiliated with them in the past. "Berkley refused to pay
claims in the past for the school district," Thompson said.
"I'm not thrilled with this carrier."
Seeley offered the option of entering an agreement with Berkley,
but continuing to secure other bids for insurance. If a better
bid was located, he said, the district could cancel the contract
with Berkley, although it is possible such action would incur
penalties.
According to Watts, a number of factors were to blame for the
jump in insurance cost. Among them he cited September 11, poor
stock market performance for insurance company investments and
lack of competition among insurers.
The board voted to approve a contract with Berkley, with only
Rasmussen voting against the measure.
Seeley also informed the board Thursday that worker's compensation
insurance will increase 57%, costing the district $138,000 per
year instead of $88,000 per year.
That rise in costs, Seeley said, was directly related to the
number of claims filed in the district over the past several
years, which climbed from $34,589 in 1997 to $144,053 in 2000.
Based on board approval last Thursday, Berkley Risk Administrators
will be the district's workers compensation insurer as well.
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