Preserving Educational Budgetsby Reducing Insurance Costs:Creating Your Own Insurance Company

Presented by:Jim Blumreich, Chief Financial Officer

Northeast Wisconsin Technical College

Steve Stoeger-Moore, Executive Vice President

Districts Mutual Insurance

Presentation OutlineHistory

Process

Keys to Success

Benefits

Education ExposuresProperty &

contentsAthleticsStudent healthEmployeesAutoShop and labsD&OFiduciary liabilitySexual harassment

Hiring/firingTransportationResidence hallsCollectiblesForeign travelEmployee

dishonesty/crimeBusiness travel

accident

History

Group program preceded DMI◦ Created by 6, eventually grew to 15 colleges

Developed “trust” of working together◦ Spread the risk◦ Cooperative environment developed◦ Laid the groundwork

Large enough exposure base to bargain as a group◦ No individualized loss control◦ Pay the premium, we’ll pay the claims◦ Group buying, no special services◦ Coverage gaps

History

Trust paid out $26M, $5M in losses◦ 22% loss ratio◦ Premium increases were double digits◦ Budget impact

Intent to control risk management◦ Often neglected – especially at small

institutions

Champions

Timeline

1984• G

roup program started

2002• 1

5 of 16 colleges in group program

2003• S

eptember - Consultant & actuary study

• December – Board resolutions to join DMI

2004• J

anuary - Certificate of authority approval process

• July – DMI began operations

Keys to Success

Consultant• Recommende

d structure• Potential cost

savings• Create

municipal mutual under WI statutes

Actuary• Study

supported financial success

• Potential cost savings

Support• CFOs• Presidents• Boards• OCI

Risk Funding Options

CaptiveRent-a-CaptiveStock CompanyGroup ProgramPoolMutual Company

Coverage Issued

Coverages not noted are covered by WTCS Trust program

Workers Compensation

(Rating done by WI Compensation Rating Bureau)

Property

CasualtyEquipment Breakdown

Campus Violent Acts

Program Retention Levels

$225,000 Company Retention

$25,000Member Deductible

$350,000,000Excess

Including TRIA and Inland Marine

Property

$5,000 Member Deductible

General Liability

$345,000 Company Retention

$4,650,000Reinsurance

$5,000 MemberDeductible

$100,000 Member Deductible

$25,000Member Deductible

Auto Liability ELLBoiler & Machinery

Work Comp

$345,000 Company Retention

$100,000,000 BoilerReinsurance

$4,650,000Reinsurance

$350,000 Company Retention

$4,650,000Reinsurance

$250,000 Company Retention

Statutory Reinsurance Work Comp

$250,000 Company Retention

AircraftWork Comp

$3,000,000Reinsurance

Statutory Reinsurance Work Comp

$650,000X/S $350,000

Reinsurance

Organization

Consultant Legal Counsel

Actuary

Board of Directors

Executive Vice PresidentAccountant

Auditor

BrokerBank

Ancillary CoveragesForeign LiabilityFidelity Bond CrimeBusiness Travel Accident

Administrative

Support

ClaimsRisk & Loss

Control Consultant

Property, Casualty & Workers Compensation ProgramCoverages: Equipment Breakdown - Educators Legal -

Property & Machinery / Inland Marine - General Liability - Commercial Auto - Workers Compensation - Campus

Violent Acts

FundingYears 1-3

• Premiums• Artificially

-rated policies (except w/c)

• Paid same as year prior to DMI

• Capital = residual of premium minus expenditures

Year 4

• Premiums• Rates

held steady

• Exposure-based (except w/c)

• Capital = $1.5M

Benefits

Tangible

•Did not borrow to create DMI•$7.6M surplus•Close coverage gaps•Consistent policy limits•Best practices•Focus on loss control•Preserve budget•Services•DMI website (www.districtsmutualinsurance.com)

Intangible

•Services•Loss control, risk management education, hot topics

•Reduced local staff time•Networking•Attitude•Control•Risk management awareness•Company owner – skin in the game

Worker Compensation

FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 100.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

Modification Factor History

Max Median Min

Where Do We Go From Here

Loss contr

ol effort

s

Investments

-leverage our surplu

s

Increased retention

levels =

decreased

reinsurance

premiums

Rating

Return capital

Pay dividends

Pay member premium

s

Other produ

cts

Awards & Recognition

2004

•CCBO

2005

•GFOA Best Practices

•Community College Futures Assembly Bellwether finalist

2006

•Published in PRIMA

2007

•URMIA Innovative Risk Management Solutions finalist

2008

•Exec VP won Risk Innovator in Higher Education award

SummaryReduce insurance costs by creating

your own insurance company

Resources◦ Champion◦ Feasibility funding

It can be done!

Presentation handout available on ACCT website.

Thank You

Jim Blumreich Steve Stoeger-Moore

Northeast Wisconsin Technical College

Chief Financial Officer

james.blumreich@nwtc.edu

920.498.5701

Districts Mutual Insurance

Executive Vice President

steve@districtsmutualinsurance.com

605.422.2655

Questions?