Staff Report #1
June 29, 2022
To All Commissioners
Re: 2022 – 2023 General Insurance Program Renewal
Recommendation
That the Commission:
- APPROVE the general insurance program for the period of June 30, 2022 through to June 30, 2023 at a total annual cost of $2,763,625 exclusive of applicable sales tax and deductible costs, the particulars of which are as follows:
| Coverage | Premium | Insurer |
| Automobile | $2,110,634 | Zurich |
| Additional Liability ($10 mil) | 306,875 | SUM /AXAXL |
| Property | 283,958 | Zurich |
| Travel Insurance | 750 | Industrial Alliance |
| Boiler & Machinery | 2,203 | RSA / XL Catlin |
| Directors & Officers | 24,970 | AIG |
| Environmental | 34,235 | Chubb |
2. APPROVE the broker services for the period of June 30, 2022 through to June 30, 2023 with Marsh Canada at a cost of $95,000.
Background
In February of 2022, administration began the process with Marsh Canada Limited (the Commission’s broker) for the renewal of the general insurance program for the period of June 30, 2022 to June 30, 2023. With the 2020-2021 renewal (two years prior) witnessing significant rate increases of slightly above 50%, the focus of last year’s renewal was to market the portfolio and thus seek proposals from alternative carriers as well. The most challenging part of LTC’s insurance program remains the fleet policy. Due to the size and nature of the fleet, there is a limited number of insurers willing to insure this class of business. Last year Marsh did receive strong interest from Aviva, but a few outstanding issues pertaining to the current claims process rendered the Zurich proposal the best to continue with. However, a strong relationship with AVIVA was established opening the possibilities for future discussions. As proposals from alternative carriers is a significant administrative undertaking for both the carrier and insured, annual marketing of LTC’s portfolio is not recommended by Marsh every year. The 2022-2023 renewal plan was to start early and seek renewal terms from the current carriers, noting if indications were concerning, then further reviews or “marketing” could take place. After these initial discussions, Marsh felt the renewal terms would be fair and focused solely on negotiating with the current providers.
The overall increase for the 2022-2023 renewal is 6.9%, slightly above 2021-2022 (4.6%), but down significantly from 2020-2021 (52.1%). The renewal rates presented by Zurich for fleet insurance, roughly 75% of all premiums, included a 5% increase in rates, with timing of bus and service vehicle additions resulting in an overall 5.9% increase. Marsh indicated that most renewals recently have been in the 10%-20% range, so were quite satisfied with the increase in single digits. Other coverage areas for the 2022-2023 renewal saw increases from 0% to 11.6% over prior years.
The recommended renewal results in an annual premium increase of $183,282, the details of which are set out in the following table.
| Coverage | 2021-2022 | Premium Increase (Decrease) | Explanation for Increase/Decrease |
| Automobile | $1,992,227 | $ 118,407 | 5.0% increase in rate, 5.9% overall |
| Additional Liability ($5 mil) | 275,000 | 31,875 | 11.6% increase in rate |
| Property | 254,816 | 29,142 | 11.4% increase in rate |
| Environmental | 32,609 | 1,626 | 5.0% increase |
| Travel Insurance | 750 | 0 | |
| Boiler & Machinery | 2,241 | (38) | |
| Directors & Officers | 22,700 | 2,270 | 10.0% increase |
| Broker Fees | 95,000 | 0 | |
| Total | $2,675,343 | $ 183,282 | 6.9% overall increase |
The assumptions for the insurance program costs included in the Commission-approved 2022 operating budget are sufficient to cover the negotiated increases detailed above. These increases impacting 2022 will be worked into the 2023 Budget, set to be tabled in August.
In addition to the premium costs, LTC historically pays on average between $600,000 and $700,000 annually in deductible costs relating to accident benefits (as required under no-fault insurance) and public liability claims cost. For 2021, deductible costs totaled $518,032, the lowest in seven years. It is still too early to determine the impact of increasing deductibles from $50,000 to $100,000 in July 2020, as the nature of claims can take months to years to be fully realized. One other factor certainly impacting the level of claims is the ridership declines witnessed since the onset of the pandemic.
Deductible Payout History
| Year | Liability | Accident Benefit | Total |
| 2015 | 415,554 | 108,151 | 523,705 |
| 2016 | 444,083 | 282,828 | 726,911 |
| 2017 | 510,351 | 134,166 | 644,517 |
| 2018 | 708,368 | 146,115 | 854,483 |
| 2019 | 603,588 | 79,783 | 683,371 |
| 2020 | 456,340 | 116,142 | 572,482 |
| 2021 | 361,566 | 156,466 | 518,032 |
The roles of adjuster and legal representation have significant influence on the level and extent of deductible payments made, and as such, an understanding of the nature of claims experienced by a transit provider is imperative in order to mitigate payouts to the greatest extent possible. The Commission has a long standing relationship with ClaimsPro with respect to insurance adjusting services and McCall Dawson Osterberg Handler LLP for legal representation relating to claims. There are no recommended changes to either the adjuster or legal representation associated with this renewal.
Recommended by:
E.P. (Ted) Graham, Manager of Accounting
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager