REPORT TO THE CITY COUNCIL
FROM: TJ MILLER, Director
Personnel Services Department
BY: SUMEET MALHI, Interim Risk Manager
Personnel Services Department
SUBJECT
Title
Approve a Consultant Services Agreement with AON Risk Solutions, Inc., to provide insurance brokerage services to the City in the amount of $165,000 per year, for three years with an option to extend on a year for year basis up three years at $175,000 per year
Body
RECOMMENDATION
Approve a Consultant Services Agreement with Aon Risk Solutions, Inc., to provide insurance brokerage services to the City and authorize the Personnel Services Director to execute a three- year agreement in the amount of $165,000 per year with the option to extend the agreement for three additional one-year periods in the amount of $175,000 per year.
EXECUTIVE SUMMARY
In addition to self-insurance the City purchases insurance to insulate the City from severe and catastrophic liability or risk. The City contracts with an insurance broker to assist the City in: (i) evaluating external and internal risks; (ii) determining adequate levels of insurance protection and self-insured retentions; (iii) marketing the City’s risk to responsible insurance markets; and (iv) the selection of insurance companies qualified to underwrite the City's various insurance programs with the broadest coverage and the most competitive premiums.
The Personnel Services Department solicited proposals from qualified firms to provide insurance brokerage services to the City. Two proposals were received and evaluated. Aon Risk Solutions, Inc., was selected as the firm that provides extensive access to subject matter experts in risk transfer, markets available, and services offered with experience working with cities as large or larger than the City of Fresno.
BACKGROUND
Generally, the City's risk management philosophy is to assume levels of risk for all types of exposures whenever prudent and economical, and to purchase insurance to insulate the City from excessive liability and financial risks. The City’s Property, Casualty and Workers’ Compensation insurance programs include: (i) Excess Municipal Liability insurance; (ii) Airport Liability insurance; (iii) Aircraft Liability insurance; (iv) Pollution Liability insurance; (v) Special Event Liability insurance (vi) Special Liability insurance; (vii) Property insurance; (viii) Mobile Equipment Floater insurance; (ix) Crime insurance; (x) Workers’ Compensation insurance; (xi) Accidental Death and Dismemberment insurance; and (xii) Long-term Disability and Term Life insurance.
The City retains an insurance broker of record to provide, essential services including, but not limited to:
1. Assistance in the design of the City's insurance programs, including risk analysis, design of coverage forms, structure of offerings to be presented to underwriters such as the use of deductibles, self-insured retentions and aggregate stop-loss coverages, layering of primary and excess coverages. In addition, the broker evaluates pricing and negotiates with insurance carrier representatives.
2. Marketing, evaluation and assistance in the selection and placement of the insurance companies qualified to underwrite the City's various insurance programs.
3. Verification of insurance policies, reviewing policy language to ensure that the City has received desired coverages in compliance with the specifications.
4. Interpreting insurance policies, answering questions regarding insurance clauses in contracts, assisting/coordinating with the handling of claims, and issuing certificates of insurance.
5. Providing advice on new construction, analysis of fire rates, and review of recommendations from fire inspectors.
6. Assistance in establishing insurable values for City property.
7. Providing current information and recommendations regarding losses, insurance market's financial security of insurers, and risk management practices.
8. Assistance preparing insurance applications and submitting them to insurance carriers.
9. Providing oral and written communications and reports.
10. Assistance with the selection of third party administrator’s, and ancillary claims processing services.
11. Periodic training and webinars for appropriate Risk and other City employees.
The Personnel Services Department solicited proposals from qualified firms to provide insurance brokerage services to the City and received two proposals from Alliant Insurance Services and Aon Risk Solutions. Both firms are recognized within the industry as well experienced and capable. Each is qualified to provide the brokerage services that meet the City’s needs. The distinct difference between the two is in how total broker compensation is calculated. Aon Risk Solutions, Inc., submitted a proposed annual cost of $165,000 for years 1-3 and $175,000 for years 4, 5, & 6, for a total cost of $1,020,000. Aon will receive no additional compensation related to the City of Fresno’s insurance program. Alliant proposed an annual fee of $115,000 for year 1, $118,450 for year 2, $122,004 for year 3, and $125,644 for years 4-6, for a total cost of $732,386. Alliant also receives compensation from insurance carriers in the form of commissions, underwriter and business services fees. There also may be fees associated with Risk Pools. Staff recommends Aon Risk Services, Inc. as the City’s insurance broker based upon the extensive access to subject matter experts in risk transfer, markets available, and services offered. Aon has substantial experience with some of the largest cities and counties in California. These cities and counties are similar to the City of Fresno in that they own airports, maintain their own waste management, host large scale events, and have large and complex property portfolios. This experience is vital in having the ability to manage the City of Fresno’s risk exposure effectively. Aon has been able to leverage their relationships with insurance companies to get coverage for the City in situations such as purchasing motels that will undergo construction and insuring out of the box situations at the Airport.
ENVIRONMENTAL FINDINGS
By the definition provided in the California Environmental Quality Act Guidelines Section 15378 this item does not qualify as a “project” and is therefore exempt from the California Environmental Quality Act requirements.
LOCAL PREFERENCE
Local preference does not apply because neither proposer is a local firm pursuant to FMC 4-109(b)(1).
FISCAL IMPACT
Insurance broker fees and insurance premiums are already included in the Risk Management budget. There are no additional expenses associated with this Agreement since the insurance premiums will not include commissions or other fees that have been paid to the current broker.
Attachment:
Consultant Services Agreement