E&O INSURANCE POLICIES

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1 STATE OF ALASKA Department of Administration 333 Willoughby Ave, Room 700 P.O. Box Juneau, AK ITB Amendment #1 May 31, 2017 This amendment is being issued to answer questions submitted by potential bidders and to provide additional important information. Important note to bidders: You must sign and return this page of the amendment document with your bid to acknowledge material changes to the ITB made by this amendment. Failure to do so may result in the rejection of your bid. Only the ITB terms and conditions referenced in this amendment are being changed. All other terms and conditions of the ITB remain the same. Jason Grove Jason Grove, CPPB COMPANY SUBMITTING BID Contracting Officer Phone: (907) TDD: (907) AUTHORIZED SIGNATURE DATE

2 Deadline for receipt of bids amended: Bids must be received no later than 1:30 p.m., Alaska Time, on June 12, Questions submitted by potential bidders and answers from the state: Question 1: With respect to the requirement of licensees to carry errors & omissions insurance, would it be the intention of the state at time of issuance of a new or renewal license to force place licensees without proof of acceptable outside coverage into this program, or else would the existence of the policy be made known to licensees who need coverage in some other way? Licensees are not required to utilize the contract resulting from this ITB to purchase errors and omissions policies. However, anyone who does not have the required coverage, whether obtained through the contract or independently, will not be able to legally hold a real estate license. The state encourages bidders to offer as competitive policy rates as possible to increase the incentive for licensees to utilize the contract. DCEED and the Real Estate Commission will certainly market the contract to current and potential licensees. Question 2: We understand that by grouping together a large number of similar risks, we are hoping to reduce the premium cost and provide an affordable solution for licensees. In some cases, we may be asked under this program to insure an individual with a history of significant losses, who because of the requirements of premium and deductible limit, would generally be considered uninsurable under the policy. While we would not anticipate that this would happen very often, would underwriters have the ability to turn such licensees away, subject to pre-approved loss ratio requirements, or would underwriters be required to accept all applicants under the master policy? The contractor is required to provide a policy that meets the requirements set forth in this solicitation to any applicant. For clarity, the current Policy Requirements section of the ITB is deleted and replaced with the following: POLICY REQUIREMENTS: The contractor is required to provide errors and omissions insurance policies to all licensees who apply under this contract. All policies must be on a yearly basis beginning January 1, 2018, and must meet the following requirements of 12 AAC : However, the cost scoring structure is hereby amended to allow bidders to enter a minimum and maximum yearly policy amount for each licensee type. The revised Bid Schedule is posted on the state s Online Public Notice website along with the ITB and this amendment, and is Page 2 of 8

3 titled ITB Bid Schedule v2. Bidders must submit this version of the Bid Schedule with their bid. The third paragraph in the current Method of Award section of the ITB is also deleted and replaced with the following: Bidders must use ITB to enter the maximum yearly cost for a policy that meets the requirements specified in this ITB, for each real estate licensee type. Those costs will be combined and award will be made to the overall lowest responsive and responsible bidder. To be considered responsive, bidders must bid on all real estate licensee types. Bidders must use ITB Bid Schedule v2 to enter the minimum and maximum yearly cost for a policy that meets the requirements specified in this ITB, for each real estate licensee type. Those costs will be combined and award will be made to the overall lowest responsive and responsible bidder. To be considered responsive, bidders must bid on all real estate licensee types. In addition, the current Policy Amounts section of the ITB is deleted and replaced with the following: POLICY AMOUNTS: For all licensees who seek E&O policies through this contract, the contractor is allowed to loss rate for individual licensees within the minimum and maximum policy amounts offered in response to the ITB, provided the contractor does not exceed the maximum yearly cost identified on the Bid Schedule. For licensees the contractor determines are high enough risk that the yearly policy amount should exceed the maximum yearly cost, the contractor shall work with the Real Estate Commission to identify and establish the criteria in which this scenario applies along with the yearly policy rate for those licensees. That cost cannot exceed the maximum yearly cost of $2,500 set forth by 12 AAC Question 3: Requesting confirmation that the Subcontractors and Joint Ventures clause of the ITB (Page 14) does not apply to a licensed insurance agent or broker accessing an Errors & Omissions Insurance program through a program manager or wholesale broker. Correct. For clarity, the current Subcontractors and Join Ventures section of the ITB is deleted and replaced with the following: SUBCONTRACTORS AND JOINT VENTURES: Page 3 of 8

4 Subcontractors and joint ventures are allowed under this contract. If a bid with subcontractors is selected, the state may request the following information about each prospective subcontractor: complete name of the subcontractor; complete address of the subcontractor; type of work the subcontractor will be performing; percentage of work the subcontractor will be providing; evidence that the subcontractor holds a valid Alaska business license; and a written statement, signed by each proposed subcontractor that clearly verifies that the subcontractor is committed to render the services required by the contract. A bidder s failure to provide this information within five working days from the date of the state s request may cause the bid to be considered non-responsive. If submitting a bid as a joint venture, the bidder must submit a copy of the joint venture agreement which identifies the principals involved and their rights and responsibilities regarding performance and payment. Question 4: The Contract Period section of the ITB provides that the state will determine whether contract renewals may be exercised, but will additional one-year contract terms be renewed upon mutual agreement (in other words, may the state renew the contract for additional terms without consent of the bidder)? Additional terms of the contract will not be renewed based on mutual agreement. The state reserves the right to exercise renewal options at its discretion. Question 5: The Contract Prices section of the ITB provides the price adjustments will be made in accordance with the percentage change in the U.S. Department of Labor Consumer Price Index (CPI). Insurance rates are not typically changed due to the CPI. Insurance rates are determined based upon an actuarial review of premium, loss and expense experience for the program. Insurance companies are required to file premium rate changes with the Alaska Division of Insurance and must provide data to support the requested rate change. It would not be standard practice for an insurance company to be required to make annual rate revisions or to make filings based upon a CPI change. May the insurance provider elect to not make premium price adjustments based upon a CPI change? Also, may the price be adjusted if the insurance company determines a premium increase or decrease is needed based on program loss experience, so long as the insurance provider and Page 4 of 8

5 the Real Estate Commission agree to the change? As noted above, insurance rates are determined based upon an actuarial review of premium, loss and expense experience for the program. Insurance companies are required to file premium rate changes with the Alaska Division of Insurance and must provide data to support the requested rate change. Accordingly, any increase would be supported by documentation. Having an available CPI adjustment for the policy rates is required by AS (4), so that will remain unchanged. However, to accommodate the need to increase or decrease a policy premium based on program loss experience, the following language is also inserted into the Contract Prices section of the ITB: Policy premiums may be increased or decreased yearly based on an actuarial review of premium, loss and expense experience for the program, provided the contractor and the Real Estate Commission agree to the change(s). Any increase must be supported by documentation, and the contractor is required to file any premium rate changes with the DCCED Division of Insurance along with other data that may be required by that division. Question 6: The Policy Requirements section of the ITB provides that all errors and omissions insurance policies provided by the contractor must be on a yearly basis beginning January 1, The Alaska Real Estate Commission website states that licenses expire January 31 on even number years. It is our understanding that the group insurance policy period will begin January 1, 2018 and renew annually. For licensees who timely renew their real estate licenses and purchase insurance through the group program, will their real estate license period be January 31, 2018 to January 31, 2020 and their insurance policy period be January 1, 2018 to January 1, 2019? Most of the programs in other states with mandatory group insurance programs provide for the group insurance policy to run along with the licensing period, so we wanted to make sure that the Commission intends for the licensing period and group insurance program inception dates to differ. The yearly basis for the policies will remain unchanged. During the contract term, if the state and contractor determine this structure is causing any issues, it can be addressed by an amendment to the contract. Question 7: The Reporting Requirements section of the ITB provides that the contractor shall notify the Real Estate Commission in writing of any lapse in a licensee s insurance coverage not later than 30 days prior to the date the coverage is scheduled to expire. Page 5 of 8

6 We note that 12 AAC requires similar notification to the Real Estate Commission for equivalent insurance coverage (coverage not obtained outside of the contract established by this ITB). It is likely that the statute requires notification for equivalent coverage since licensees with insurance through various independent policies would not have a common expiration date. If the group policy period is January 1, 2018 to January 1, 2019 (and subsequent annual periods), then coverage for all licensees enrolled in the group policy would expire on the group policy s expiration. There would be no lapse in the licensee s coverage if the policy period has not expired. a) Does the Real Estate Commission want the group policy provider to send a list of all licensees who have not renewed 30 days prior to the January 1 expiration date or would providing a list of all licensees (knowing there is a common policy expiration date) be sufficient notice? b) Does the Real Estate Commission wish to set a deadline for insurance renewal 30 or more days prior to the policy expiration date? If so, what is the deadline date and will this deadline be required for both the group program and for proof of equivalent insurance coverage? For a), the current Reporting Requirements section of the ITB is deleted and replaced with the following: REPORTING REQUIREMENTS: Upon the request of either the Real Estate Commission or the DCCED procurement officer, the contractor shall provide the names of those insured, claims information, prior claims experience if known, nature of the claim, date of claim and amount paid on either a quarterly or annual basis. The parties may work together may to determine what type of information is to be provided, including the report format. For b), the state does not wish to set an insurance renewal deadline for any coverage at this time. It is a licensee s responsibility to notify the Real Estate Commission of any lapse in coverage, and the Real Estate Commission will not be able to issue or renew a license with proof of E&O insurance from the licensee. Question 8: On page eight of the ITB, 12 AAC provides that every three years after the initial procurement the department may adjust the amount of coverage required under 12 AAC (a). The department would not make an adjustment if the department finds the adjustment will significantly reduce the number of insurers willing to bid on a contract to offer the master errors and omissions insurance policy. Page 6 of 8

7 a) If there is a change in the limits of liability, would the contractor be permitted to adjust the premiums to reflect the new limits? b) Does this mean that the contractor would be able to decline to offer that proposed increased limits if the new limits create an unacceptable risk? The following language is inserted into the Contract Prices section of the ITB: 12 AAC allows the state to adjust the amount of coverage required under 12 AAC (a) every three years after the establishment of a contract resulting from this ITB. Should the state adjust the amount of coverage required, the contractor will be allowed to adjust the insurance premiums under the contract after negotiation with the Real Estate Commission. If adjustments to the amount of coverage will cause an unacceptable risk for the contractor, the contractor will not be forced to accept the adjustments under the contract and the contract will be resolicited. Any premium rate changes or adjustments will be documented via an amendment to the contract. Question 9: It s our understanding that an insurance agency may submit a bid, so long as the agency partners with an insurance company that meets all of the ITB s requirements and includes the insurance company credentials in the bid quote. Will you please confirm this is correct? Correct, with the understanding that the information detailed in Required Bid Response Information section of the ITB must be included with the bid. Question 10: The Contract Payment section of the ITB state that all invoices must be sent to the licensee s address of record or address provided to the contractor by the licensee. Will the Real Estate Commission provide licensees current address of record for annual mailings? Can the Real Estate Commission provide addresses? Licensee s current address of record can be found on the Corporations, Business, and Professional Licensing website: Page 7 of 8

8 DCCED cannot provide addresses and DCCED does not currently require a licensee s address. The contractor may work with licensees to obtain addresses as available. The following language is also inserted into the Contract Payment section of the ITB: Licensees shall be billed monthly and if available from the contractor, have the option of setting up automatic payment from their banking account. If a licensee cancels their policy, the licensee is only responsible for payment up until the time of cancellation. END OF AMENDMENT #1 Note: The changes to the ITB made by this amendment have been incorporated into the main ITB document posted on the state s Online Public Notice System. Page 8 of 8