michael mchugh area executive vice president arthur j. gallagher risk management services, inc....
TRANSCRIPT
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Risk Management 101
Michael McHughArea Executive Vice President
Arthur J. Gallagher Risk Management Services, Inc.
Presented by:
Presented at:
Illinois ASBO 61st Annual ConferenceMay 16, 2012
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31+ Years Insurance and Brokerage Experience
National Pooling Niche Principal
National K-12 Principal-Arthur J. Gallagher Public Entity & Scholastic Division
ASBO International Member
Illinois ASBO Member for 25 years
Experience working with over 575 districts on various risk & insurance topics
Introductions
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1. Define Risk Management2. Explore basic components of a
typical Risk Management Program
Objectives
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Risk Management covers all the processes involved in identifying, assessing and judging risks, assigning ownership, taking actions to mitigate or anticipate them, and monitoring and reviewing progress.
Risk Management Defined
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Planning for the negative consequences of any decision process or action by using whatever means feasible to control the chance of financial loss.Public Sector Risk Management Manual
Risk Management Defined
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Trying to stop losses from happening (through avoidance, risk control, loss control or loss prevention)
Paying for the losses that do occur (through reduction, insurance or risk transfer)
Risk Management Involves
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Strategic Risk – strategic objectives and political, economic and global market conditions
Financial Risk – currencies, interest rates, credit and liquidity risks
Operational Risk – risks related to systems, processes, technology and people
Compliance Risk – regulatory and legal Reputational Risk – damage to “brand” Hazard Risk – property, liability, workers
comp
Risk Categories
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School Districts = “Institutions of Learning” Education of Students Athletics & Extracurricular Activities
Employees & Volunteers Transportation Food Service/Cafeteria PTO/PTA/Booster Clubs Buildings/Contents including Materials and Mobile
Equipment Playgrounds and Athletic Facilities Educational Foundations
Risks for Public Schools
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The Evolution of Risk Management
1978• Insurance Procurement
•Policy Administration
1988•Risk Financing•Loss Control•Organizational RM Focus
•Claims Management
•Regulatory Compliance
•Public Safety RM•Employee Benefits
1998•Risk Financing•Cost Allocation•Loss Control•Contractual Risk Transfer
•Claims/Litigation Management
•Outcome Orientation & Benchmarking
• Integrated Disability Management
2008•Chief Risk Officer
•Enterprise Risk Management
•Consultancy•Risk Financing•Multi-Jurisdictional Integration
•Loss Control•Claims/Litigation Management
•Cost Allocation•Bus./Government Partnerships
From PRIMA
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Risk Management Toolkit
Risk
Avoid
Sub-contract
Exit
ControlPeople
Plant
FinanceFund
Insurance
Transfer Contract
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STANDARD PUBLIC SCHOOL INSURANCE COVERAGES
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A contractual relationship that exists when one party (the insurer) for a consideration (premium) agrees to reimburse another party (the insured) for loss to a specified subject (the risk) caused by designated contingencies (hazards or perils).
Insurance
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Definition of Insured Needs to be broad so that it covers
the following: District and its employees / student teachers Elected / appointed officials Sponsored / endorsed organizations Volunteers who do work at your
direction on behalf of the District
Insurance Program Coverages
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Buildings Contents Inland Marine
EDP Equipment EDP Extra Expense EDP Media AV Equipment
Valuable Papers Fine Arts Musical Instruments
Builder’s Risk Needed for new
construction and renovations at your district
Extra Expense Increased Cost of
Construction / Demolition Coverage
Auto Physical Damage
Property Coverage
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Employee Dishonesty Loss of Money - inside / outside
premises Depositor’s Forgery Bonds
i.e. working cash / treasurer’s / life safety
Crime Coverage
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Fired / Unfired Pressure Vessels MEA coverage Refrigeration coverage Air Conditioning Units Extra Expense Water Damage Joint Loss Endorsement
Boiler and Machinery Coverage
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Coverage for autos, trucks, bus fleet Auto Liability Auto Physical Damage Hired / Non-owned Coverage
Automobile Coverage
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Limits usually $1M per occurrence / $3M aggregate
Fire Damage (Legal Liability) $500K limit
Employee Benefits Liability - $1M Claims-Made coverage
Broad form General Liability coverage form, which includes: Bodily Injury /
Property Damage Personal Injury and
Contractual coverage
Sexual Abuse / Misconduct coverage
Athletic Participation coverage
General Liability Coverage
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This is you, your boss, and your Board
Get a broad definition of named insured
Can be written on an “occurrence” basis or on a “Claims-Made” basis
Make sure it covers: Employment Practices Liability –
failure to employ/promote Discrimination Harassment Wrongful Termination / Discipline IDEA coverage Back Wages coverage Non-Monetary coverage Failure to grant tenure Retaliation (Including Lockouts) Wrongful demotion or negligent
employee evaluation
School Board Liability Coverage
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Medical Indemnity Statutory Employers Liability Other States Endorsement Voluntary Compensation
Endorsement
Workers’ Compensation
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Provides $5M of coverage for ALL students in the district for ALL school sponsored and school supervised activities
Covers 100% of any out of pocket cost incurred by parent/guardian for medical expenses
In case of no primary medical insurance, becomes primary medical insurance for injured student
Provides option for 24-hour coverage to be purchased by parent/guardian
Reduces General Liability Premiums
Student Accident Program
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Reduces litigation against district Reduces administrative burden on
district administration Good-Will gesture towards
community Reduces claim costs Easy for parents to get reimbursed
Student Accident Insurance Benefits
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Pollution Liability Foreign Liability Special Events Professional Liability
Nurses Educational Foundations Fiduciary Liability – including 403(b)
exposure
Specialty Coverages
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Separate Board of Directors creates exposure
Provides up to $5M for fiduciary liability arising out of funds managed by Foundation
Educational Foundation Directors’ & Officers’ Liability Coverage
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Covers liability arising from trips overseas
Provides coverage in case of bodily injury or property damage to a third party while traveling abroad
VERY INEXPENSIVE COVERAGE
Foreign Liability Program
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Pros and Cons of Available Options
First Dollar
Insurance Program
Safety Dividend Program
Large Deductible Retro-Plan
All Lines Aggregate Stop Loss
Specific Excess
Insurance Placements
by Line
Rent-a-Captive
Captive or Risk
Purchasing Group
Pure Self-Insurance
Less ControlLess Risk
Greater ControlGreater Risk
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Stand Alone / Individual District Purchase
Cooperative Purchasing Pools Risk Retention Groups Captives
Pros and Cons of Available Options
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Cooperative Purchasing Mission Eligible Members Size Lines of Coverage Program Structure Financial Condition Accessibility Governing Body
Pros and Cons of Available Options
Know the Group’s
Mindset!!!
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Loss Control Activities Vendor Capabilities and Resources Claim Settlement Policy Member Requirements
Financial Contractual
Cooperative Purchasing
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CONCLUSION
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Michael McHugh - Area Executive Vice President
Public Entity & Scholastic DivisionArthur J. Gallagher Risk Management Services
Direct: (630) 285-4373Email: [email protected]
Contact Information
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QUESTIONS?