“It would be very helpful to explain if the 32% year-over-year increase is a blanket one affecting other jurisdiction similarly situated to Boulder City or if we are being singled out in some way.”
The question put forth during the public comment period by Boulder City resident Fred Volz was a way of asking if recent settlement agreements with former city employees totalling more than $1 million could explain the sharp increase in insurance premiums the city will be on the hook for in the coming fiscal year.
The question was never directly addressed either in the presentation made by Marshall Smith representing POOL/PACT or in questions from the council.
In the current fiscal year, the city paid just shy of $700,000 for a combination of property insurance and workers compensation coverage for city employees. In fiscal year 2024, that amount is set to rise to $920,917.87
The “let’s keep things moving” theme continued when Smith came to the podium to give his presentation after Kevin Hickey of the Nevada Rural Housing Authority finished up. Mayor Joe Hardy jokingly asked Smith if he was, “Going to take a page out of Kevin Hickey’s book and see how quickly you can do yours?”
But it’s a complex subject. POOL/PACT is not a commercial insurance company. It is a non-profit, statutorily created intergovernmental agency with 139 public entity members throughout the state. The actual coverage its members receive is purchased on the reinsurance market and that market has gotten substantially more expensive in the past few years. Smith pointed to a combination of inflation, climate-driven costs for things like hurricanes, plus sexual molestation and police misconduct settlements as drivers for increased rates. Cyber risks are another issue that Smith referred to, explaining that costs went up but that actual coverage decreased due to sharply increased costs for this kind of coverage.
Reinsurance costs mean that every entity within POOL/PACT will see a 14% increase in rates regardless of any changing circumstances in any specific municipality. This compares to increased averaging 25%-35% on the commercial market.
The rate for Boulder City will go up by 32.4%.
Smith said that the additional costs were tied to an increase in property coverage, mostly associated with the purchase of new vehicles. Coverage associated with the Police Department went up by 18% and coverage for the city’s EMTs is up by 32%.
An option to raise the city’s deductible in order to lower the premium was presented to city staff who advised against the change, calling it “very risky.”
The city’s current deductible is $10,000. Raising that to $25,000 would result in a savings in terms of overall premium costs of more than $100,000. But, assuming an average of seven claims paid out over the course of the year, if all claims were to come in over the deductible, the cost at a $25,000 deductible would be $175,00 versus $70,000 at the current $10,000 deductible, erasing any potential savings.
City staff looked at deductible-related costs over the past three years . They calculated how much was paid with the existing $10K premium, and calculated what those claims would have cost with a $25,000 deductible. In two of the three years examined, the city would have lost money by taking the $25 deductible.
The proposal to accept the $920,917.87 premium and keep the deductible at $10,000 passed unanimously