Wednesday, June 26, 2002


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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