Staff Report #2
June 26, 2024
To All Commissioners
Re: 2024 – 2025 General Insurance Program Renewal
Recommendation
That the Commission:
i) APPROVE the general insurance program for the period of June 30, 2024 through to June 29, 2025 at a total annual cost of $3,191,733 exclusive of applicable sales tax and deductible costs, the particulars of which are as follows:
| Coverage | Premium | Insurer |
| Automobile | $ 2,502,781 | Zurich |
| Property | 217,856 | Zurich |
| Liability (General, Abuse) | 95,674 | Zurich |
| Liability (Umbrella) | 299,000 | Marsh Bowring |
| Travel Accident | 1,200 | Industrial Alliance |
| Boiler & Machinery | 2,469 | RSA / XL Specialty |
| Crime | 9,250 | Liberty |
| Directors & Officers | 25,595 | AIG |
| Environmental | 37,908 | Chubb |
ii) APPROVE the broker services for the period of June 30, 2024 through to June 30, 2025 with Marsh Canada at a cost of $100,000.
Background
In March of 2024, 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, 2024 to June 29, 2025. The most challenging part of London Transit’s insurance program remains the fleet policy. Due to the size and nature of the fleet, there is traditionally a limited number of insurers willing to insure this class of business. As soliciting proposals from alternative carriers is a significant administrative undertaking for both the carrier and insured, annual marketing of London Transit’s portfolio is not recommended by Marsh every year. Similar to last year, the 2024-2025 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 quite fair and focused solely on negotiating with the current providers.
After gathering all policy renewal terms, the overall increase for 2024-2025 is 5.0%, nearly half of what occurred for the 2023-2024 renewal (9.8%). The renewal rates presented by Zurich specifically for fleet insurance, accounting for almost 80% of all premiums, were held flat (0.0% increase in rates), with the increase and timing of bus additions resulting in a 5.6% overall increase. This flat rate increase is an indication of a softening market and a welcome reprieve from significant rate increases witnessed over the past five years (an average of 16% per year). Similar to fleet, the other coverage areas, apart from environmental (5.6%), saw flat rates or, at worst, slight minimum coverage bumps (travel and boiler).
The recommended renewal results in an annual premium increase of $155,750 over last year, inclusive of broker fees, the details of which are set out in the following table.
| Coverage | 2023-2024 | Premium Increase (Decrease) | Explanation for Increase/Decrease |
| Automobile | $ 2,367,959 | $ 134,822 | 0% increase in rate, 5.6% fleet increase |
| Property | 202,744 | 15,112 | 0% increase in rate, 7.4% in insured value |
| Liability (General, Abuse) | 94,826 | 848 | 1% increase in rate (general liability) |
| Liability (Umbrella) | 299,000 | – | Flat |
| Travel Accident | 750 | 450 | Minimum policy fee increase |
| Boiler & Machinery | 2,325 | 144 | Minimum policy fee increase |
| Crime | 9,250 | – | 2nd of three-year policy |
| Directors & Officers | 25,595 | – | 0% increase in rate |
| Environmental | 36,034 | 1,874 | 5.2% increase in rate |
| Broker Fees | 97,500 | 2,500 | 2.6% increase in fee |
| Total | $ 3,135,983 | $ 155,750 | 5.0% overall increase |
The assumptions for the insurance program costs included in the Commission-approved 2024 operating budget are sufficient to cover the negotiated increases detailed above and also help to keep the Commission’s insurance costs well within the levels included in the multi-year budget from 2025 through 2027. These updated rates will be worked into the 2025 operating budget set to be tabled in August.
In addition to the premium costs, London Transit 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 2023, deductible costs totaled $761,308, the second highest level in nine years, noting claims in 2022 were the lowest in that same time frame. From the history in claims costs noted below, it could be anticipated that claims will continue to rise, noting the reductions in 2020 through 2022 were most likely impacted by reduced riders during COVID, as well as the increase in deductible in 2020 from $50,000 to $100,000 that had yet to show indications of increased claims.
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 |
| 2022 | 350,400 | 155,401 | 505,801 |
| 2023 | 705,454 | 55,854 | 761,308 |
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 Shillington McCall 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