Impact of COVID-19 On Public Entities
Everyone is concerned about the impact of COVID-19 on our cities and counties as they maintain services but experience reduced revenues while the public sector insurance market continues to harden. Those cities that are more dependent on sales tax revenue as a part of their budget will see a lagging impact from COVID-19. Generally, the sales tax revenue is expected to level out through the fiscal year but the monthly budgets will see variations. The property taxes are a county function and will see little interruption.
While the Public Entities are experiencing lower revenues, the public sector insurance marketplace is increasing rates 10% on average. Those risks with poor lost experience are seeing 20 to 25%. There is upward pressure on the deductibles as a means to manage risks and create an incentive for better risk control. Counties, in particular, have experienced poor automobile results. Additionally, most carriers have decided not to pursue counties due to the COVID-19 jail exposure. As a result, virtually every county stayed with the incumbent carrier through the 7/1 cycle, even when the rates and deductibles increased significantly.
The excess and facultative property market rates have increased dramatically due to the 2018 and 2019 results which were some of the worst property, catastrophic, loss years in history. This has driven the first dollar market up as they retain less risk. Similarly, the excess casualty as seen premium increases with lower limits. Our D1 colleges and public schools have experienced rate increases across the board. The colleges have seen a 50% reduction in casualty capacity and a significant reduction in sexual abuse limits, with virtually every carrier moving to a claims made form for the sexual abuse. This is driven by the huge SAM claims at Ohio State and Michigan.
Some areas continue to be a safe harbor for the insurance carriers In the public sector. Workers compensation has been the only line that continues to be competitive. COVID-19 has yet to have an impact on this line from our perspective. Excess WC carriers have targeted a 6% premium increase and continue to push for higher retention’s, particularly on the police and fire classes. Utility districts continue to be attractive because they are not dependent upon sales tax, the revenue flow remains consistent and they have little exposure to COVID-19.
In summary, the public sector continues to harden with particular emphasis on the automobile line. Insurance brokers should be involved in the initial phase of their budget process and present renewal terms earlier than normal. Improved Risk Management and risk transfer are critical. The expertise and knowledge of the insurance broker is more important than ever so it is incumbent upon the broker to be heavily involved in the process.