YORKTON -The City of Yorkton will split its insurance between two local firms, but it wasn’t a unanimous decision by Council at its regular meeting Monday.
At the meeting, following a protracted discussion Council unanimously chose to award Westland Insurance Group Ltd. a contract for commercial auto extension insurance services and motor licensing support for a five-year term from Jan. 1, 2023 through to Dec. 31, 2027.
And Council also chose to award Lakeview Insurance Brokers (Yorkton) Ltd. in partnership with EQUA Specialty Risk Partners Corporation; the Risk Management and Insurance Brokerage Services contract. However, Councillors Chris Wyatt and Darcy Zaharia sat opposed.
The decision to split the services came about as City administration looked into the current services being provided.
What Administration found was a volatile market, explained Marlene Hauser – Business Systems Analyst, with the City at Monday’s meeting.
“The City of Yorkton Insurance premiums for property and liability have risen by 50 per cent in the past five years,” she said.
“These changes are due, in large part, to the insurance marketplace entering a “hard market” cycle in late 2020.”
During a “hard market” positive financial results become more difficult for insurance companies. Insurers have less desire for growth and place more restrictions in the marketplace as they embark on re-evaluating their book of business, risk appetites, and the capacity they are willing or able to provide. To correct adverse loss ratios developed during a “soft market” period, underwriters impose and adhere to much stricter standards, explained Hauser.
“Additionally joint and several liability, in some cases, can leave a municipality paying a much greater share of a court ordered award than is reflective of their percentage of responsibility. These higher award settlements coupled with the effects of climate change, Covid-19, and the trend towards a more litigious society are putting an undo strain on municipal insurers,” she said.
“These factors have driven insurance rates higher and, as well, the number of insurance companies willing to offer coverage has dropped as the actuarial data shows municipalities as an unprofitable line of business.”
Given the complexity of the products and services required as part of the city insurance brokerage services and the time needed to market the City’s insurance portfolio prior to the Jan. 1, 2023 expiry date, a comprehensive Request for Proposal for Risk Management and Insurance Brokerage Services was issued on Aug. 15, 2022, said Hauser.
Based on excellent past performance and customer service provided by Westland Insurance Group Ltd., Yorkton Branch (formerly Farrell Agencies Ltd.), in the area of Commercial Auto extension insurance services and Motor Licensing support, these services were not part of the Request for Proposal, she added.
Hauser said insurance, in particular liability insurance, is increasingly complex, so managing of the City of Yorkton’s Insurance portfolio requires a high level of technical expertise, industry experience, excellent business relationships with a wide range of markets and innovative negotiation skills. These strengths combine to allow a broker to obtain optimal pricing, adequate policy limits and comprehensive coverage tailored to the risk.
In the end the City of Yorkton received six proposal packages from insurance firms.
The proposals were evaluated based on a number of factors, by an evaluation team of city staff.
“At the end of the evaluation process Lakeview Insurance Brokers (Yorkton) Ltd. in partnership with EQUA Specialty Risk Partners Corporation had the highest score and is being recommended as the successful proposal,” said Hauser.
Coun. Randy Goulden said she has seen insurance increasingly become a municipal issue.
It’s “a trend we’re seeing provincially and nationally,” she said, adding it is on the agenda of both FCM and SUMA.
However, Zaharia said he was having a hard time understanding why the services were split, and why a request for proposals was not requested on the auto side.
City manager Lonnie Kaal pointed out that for contacted services such as legal, accounting, auditing and insurance there is no requirement for the municipality to go to tender.
Hauser also noted that since auto insurance is ultimately handled by SGI, there is little expectation of a better deal from another firm as fees are listed publicly.
However, while ultimately supportive of the change, Mayor Mitch Hippsley also noted not taking auto insurance to a RFP was disquieting.
“Really I would have liked to have been able to tender that out,” he said.
But, Wyatt was not pleased either.
“I am not happy here the way this is playing out right now,” he said.
Wyatt would later suggest Council be informed when administration is looking to undertake such a process, not after it has occurred.
The total cost of insurance for the City of Yorkton is approximately $494,000.