CITY COMMISSION AGENDA MEMO September 14, Cathy Harmes, Director of Human Resources/Risk. Award Insurance Broker Agent-of-Record BACKGROUND

Size: px

Start display at page:

Download "CITY COMMISSION AGENDA MEMO September 14, Cathy Harmes, Director of Human Resources/Risk. Award Insurance Broker Agent-of-Record BACKGROUND"

George Lucas
5 years ago
Views:

1 CITY COMMISSION AGENDA MEMO September 14, 2017 FROM: Cathy Harmes, Director of Human Resources MEETING: September 19, 2017 SUBJECT: PRESENTER: Award Insurance Broker Agent-of-Record Cathy Harmes, Director of Human Resources/Risk Manager BACKGROUND On September 18, 2012, the City Commission awarded a five-year agreement with Arthur J. Gallagher, of Kansas City, Missouri, to be the Broker Agent-of-Record to secure the City s property, casualty, and liability insurance for the calendar years 2013 through With the five-year agreement with Arthur J. Gallagher to expire on December 31, 2017, City Administration sought permission to move forward with a Request for Proposals (RFP) to select an Insurance Broker Agent of Record for the City s Commercial Insurance Program and Risk Management Services. On May 2, 2017, the City Commission approved the Request for Proposals as outlined in the documents prepared by City Administration, and authorized City Administration to solicit proposals for Insurance Broker Agent of Record and Risk Management Services, and appointed Commissioner Dodson to the Selection Committee. On June 1, 2017, the City s Risk Manager sent out a Request for Proposals (RFP) for Insurance Broker Agent of Record for the City s Commercial Insurance Program and Risk Management Services. The Request for Proposals was sent to local and regional insurance firms. A notice was also placed in The Manhattan Mercury and posted on the City s website and Drexel Technologies website. The City received three (3) proposals for consideration: Arthur J. Gallagher Risk Management Services, of Kansas City, Missouri; Willis Towers Watson, of Topeka, Kansas; and Holmes Murphy and Associates, LLC, of Kansas City, Missouri. All three (3) brokers were selected for interviews. DISCUSSION Interviews with the three finalists were conducted on August 24, Each of the three brokers provides a wide array of service packages. The Request for Proposals places particular emphasis on a broker s experience with the development, implementation, and

2 management for public entity commercial insurance programs, safety and loss prevention services, including 26 specific risk management service standards. Interviews provided considerable insights into each broker s approach to marketing the City s insurance program and particular strength as a provider of brokerage and risk management services in the public sector. Arthur J. Gallagher and Willis Towers Watson exhibit superior knowledge and abilities in addressing public sector specialized needs as demonstrated by their commitment in dedicating a number of staff specialists with expertise in the public sector marketplace. Holmes Murphy and Associates, LLC, is gaining momentum in this marketplace, but does not have the breadth of services offered by the other two brokers. As a governmental entity, it is always important to recognize the lowest fee for service, when possible. Fees for the three proposals range from $22,500 - $32,000. Arthur J. Gallagher s proposal offers the same fees they have charged the City for the past five (5) years. Additionally, over this period Arthur J. Gallagher has negotiated very favorable rates for the City. The total premium for the policy period is a 5% reduction from the policy period. Holmes Murphy does not provide an extensive list of Kansas governmental entity references as they are fairly new to the public sector marketplace. Willis Towers Watson provides strong options; however, their higher fees cannot be justified. Arthur J. Gallagher, on the other hand, is one of the top industry leaders in public sector risk management. They have demonstrated over the past five (5) years that they have the ability to service the City s account out of their Kansas City office. In addition, Gallagher has access to extensive national specialized resources from their 36 branch offices across the U.S. Gallagher s strong commitment to customer service and ability to aggressively seek competitive insurance alternatives is demonstrated by the 7,000 + public entity clients they serve. They are more than capable of continuing to provide the City of Manhattan insurance brokerage services. The Selection Committee recommends, and City Administration concurs, to award Arthur J. Gallagher, of Kansas City, Missouri, as the City s broker Agent-of-Record, to secure property and casualty insurance coverage, and provide risk management services for the calendar year 2018, renewable for a period of up to five years through FINANCING Arthur J. Gallagher, of Kansas City, Missouri, has submitted a broker fee beginning January 1, 2018, in the amount of $24,000, and will seek no increase in the proposed annual fee for the contract period.

3 ALTERNATIVES It appears the Commission has the following alternatives concerning the issue at hand. The Commission may: 1. Accept the recommendation of the Selection Committee and award and authorize the Mayor to execute a Compensation Agreement, in the amount of $24,000, to the firm of Arthur J. Gallagher, of Kansas City, Missouri, as Insurance Broker Agent-of-Record beginning January 1, 2018, renewable for a period of up to five years through Do not accept the recommendation of the Selection Committee. 3. Request City Administration negotiate an Agent-of-Record agreement with another agency for a one-year period of time. 4. Table the issue. RECOMMENDATION City Administration recommends the City Commission accept the recommendation of the Selection Committee and award and authorize the Mayor to execute a Compensation Agreement, in the amount of $24,000, to the firm of Arthur J. Gallagher, of Kansas City, Missouri, as Insurance Broker Agent-of-Record beginning January 1, 2018, renewable for a period of up to five years through POSSIBLE MOTION Accept the recommendation of the Selection Committee and award and authorize the Mayor to execute a Compensation Agreement in the amount of $24,000, to the firm of Arthur J. Gallagher, of Kansas City, Missouri, as Insurance Broker Agent-of-Record beginning January 1, 2018, renewable for a period of up to five years through Enclosures: 1. Summary Responses to Request for Proposals 2. Compensation Agreement

4 CITY OF MANHATTAN, KANSAS INSURANCE BROKER SELECTION PROPERTY / LIABILITY INSURANCE JANUARY 1, DECEMBER 31, 2022 Agency / Servicing Arthur J. Gallagher Willis Holmes Murphy & Associates, LLC Location 2345 Grand Boulevard, Ste. 400 Overland Park, KS & 1828 Walnut Street, Suite 701 Kansas City, MO Topeka, KS Kansas City, MO Years in Business 85 Years 151 Years 85 Years Website Premium Volume $4.2 billion $8.2 billion Major Carriers American Alternative/Federal OneBeacon CHUBB Hanover Zurich OneBeacon Citizen's Insrance Co. Liberty Cincinnati Hartford Safety National BRIT ACE Ace AIG EMC Zurich BCS Insurance Western Surety Swiss RE Axcess Travelers Great American CHUBB Hanover Atlantic Speciality Ironshore 150 Total markets > $3.7 billion Travelers XL Catlin Zurich AIG Beazley Hanover EMC Ironshore CHUBB Hartford OneBeacon Nationwide Berkshire Hathaway ` `` Current Public Entity Accounts: Lawrence, KS Baldwin City, KS Service Team: Coffeyville, KS Emporia, KS Olathe, KS Topeka, KS Hays, KS Leawood, KS Lenexa, KS Jessica Govic, Area Vice-President Christina Pyle, Area Vice President City of Topeka (Benefits) Douglas County Shawnee County Board of Commissioners Steve Baxter, Vice President/Clent Advocate John Puetz, Dorporate Risk and Broking Leade City of Overland Park (since April 2017) City of Carter Lake, IA Unified Government of Wyandotte County/Kansas City, Kansas Joe Tiernan, Sr. Account Executive Nate Heying, Vice President/Shareholder Charlie Herr, Area Vice President Jan Mason, Principal Client Services Debra Baldwin, Client Service Specialist Kylee Heusi, Sr. Placement Consultant/Service Team Leader Darla Mose, Account Manager Fees Annual Fee $ 24,000 (Year One - Year Five) Annual Fee $32,000 (Year One - Year Five) Loss Control $165 per hour Appraisals $300 per location Separate price for Safety and Loss Prevention Services Appraisals not included Annual Fee $22,500 (Year One - Year Five) Safety & Loss Prevention - 10 hours included in Annual Fee; Additional services $150 per hour Appraisals $250 per premises `

5 Compensation Agreement City of Manhattan & Arthur J. Gallagher Risk Management Services, Inc. THIS COMPENSATION AGREEMENT is made and entered into and effective the 1 st day of January, 2018 ( Effective Date ) by and between CITY OF MANHATTAN, KS, a Kansas Municipal Corporation, ( Client ), and ARTHUR J. GALLAGHER RISK MANAGEMENT SERVICES, INC., an Illinois corporation ( Gallagher ). I. TERM AND TERMINATION This Agreement shall commence on the Effective Date for a term of five (5) years and shall automatically renew on the first anniversary of the Effective Date, but may be terminated by either party at any time upon thirty (30) days prior written notice. II. III. IV. OBLIGATIONS OF GALLAGHER Gallagher will provide the services set out on Exhibit A attached hereto (collectively, the Services ) to Client. If the Services include the placement of insurance coverages, Gallagher will use its commercial best efforts to secure such insurance coverages on Client s behalf. In the event an insurance company cancels or refuses to place such insurance coverages, Gallagher will use its commercial best efforts to obtain the coverage from another insurance company. OBLIGATIONS OF CLIENT Client shall remunerate Gallagher its usual and customary brokerage commission for the Services. In addition to or in lieu of commission, Client shall pay Gallagher an annual fee of $24,000 for the Services, which such fee may be revised at the time of renewal of this Agreement by the execution of an amendment to this Agreement signed by the parties hereto. If work is required to be performed in addition to the Services, Client agrees to compensate Gallagher for such additional work at its usual and customary rates. DISCLOSURES A. In addition to such fees and commissions provided herein, Gallagher may also receive investment income on fiduciary funds temporarily held by it, such as premiums or return premiums. Other parties, such as excess and surplus lines brokers, wholesalers, reinsurance intermediaries, underwriting managers, captive managers and similar parties, some of which may be owned in whole or in part by Gallagher s corporate parent, may earn and retain usual and customary commissions and fees in the course of providing insurance products to clients. Gallagher may also participate in contingent and supplemental commission arrangements with insurance companies. Contingent commission arrangements provide for additional contingent compensation if underwriting, profitability, volume or retention goals are achieved. Such goals are typically based on the total amount of certain insurance coverages placed by Gallagher with the insurance company, not on an individual policy basis. Supplemental commissions, unlike contingents, are known at the effective date of the policy, but are typically paid later and apart from when usual and customary commission is paid. Any such fees or commission will not constitute compensation to Gallagher under Section III. above. Fee Agreement Kansas Page 1 of 2

7 Date matching effective date or most recent amendment: January 1, 2018 EXHIBIT A The following outlines services provided by Gallagher over the term of this Agreement: Use its best efforts to secure the following lines of insurance coverage on Client s behalf: [List Coverages] Consult with City of Manhattan, KS to formulate a marketing strategy that focuses on delivering a cost-effective risk management strategy and structure based upon current market conditions. Work with City of Manhattan, KS to produce comprehensive underwriting data and criteria for insurance carrier negotiations. Formally present coverage submissions to agreed upon insurance carrier(s) and negotiate terms on behalf of City of Manhattan, KS. Summarize the results of executing the marketing strategy developed with City of Manhattan, KS and communicate program recommendations. Provide consultation to City of Manhattan, KS on exposures, existing coverage, and the desirability and/or feasibility of potential program changes when recommended by Gallagher or when requested by the client. Request change endorsements, when requested by the client or when otherwise necessary, ensuring accuracy and delivery in a timely manner. Administration of insurance program, including policy review and issuance, invoicing, coordination and/or issuance of required documentation, i.e., automobile identification cards, certificates of insurance, and other program administration, as required by the client. Review accounting and billing data received from insurance markets on client s behalf to ensure accuracy. Sample Exhibit A.doc

8 Date matching effective date or most recent amendment: January 1, 2018 INSTALLMENT SCHEDULE Payment Due Date Payment Amount $6, $6, $6, $6,000 Sample Exhibit A.doc

County of Kane Office of County Board Kane County Government Center. DOCUMENT VET SHEET for Karen McConnaughay Chaiiman, Kane County Board

Karen McConnaughay Chairman 630-232-5930 County of Kane Office of County Board Kane County Government Center /{6) ie ([: ie 0 WI ie rff~ tu ocr I 6 2012 ~~,_ KANE COUNTY BOARD 719 Batavia Avenue - ---JJ