CCAP just completed its annual conference in Erie, the first time we have held the conference there in about 20 years. The changes made in Erie since then are spectacular, especially along the bay. The hotel where most of our conference attendees stayed and the Bayfront Convention Center are both very new. In addition the county library and a maritime museum are also on the bay. It is a spectacular, well planned development and truly the jewel of the city.

The reason I mention this is what occurred to me as I walked through the new convention center during our conference. The center is striking, and it sits right on the water and immediately next to an entrance to a major marina. The design of the center is very open, with lots of windows looking out on the bay. As I walked along the main hallway to access meeting rooms and the exhibit hall, I was so impressed to see the bay, and watch boats move right by the windows. If you have to spend a long day in the convention center, this is not a bad way to do it. I found it very relaxing.

And I was grateful, and very impressed, that the process that led to this center was done so well. It was clear those involved realized the unique positives the location had to offer and employed those positives to the benefit of attendees.

I see this often with the work you all do in the counties. You use a lot of creativity, compassion and great planning to provide services to your county residents. I'm hoping those residents can recognize this and appreciate the time and effort county officials and staff expend to find the best ways to provide services.

I like this quote from George William Curtis: "It is not the ship so much as the skillful sailing that assures the prosperous voyage".

Make sure you contact us when you need help with something,

                              John Sallade

How is Insurance Priced?

What you pay for insurance depends on many factors. There are four basic factors which add up to your total cost:

• Exposures
• Claims Experience
• Administrative Costs
• Profit 

Exposures are the things the county owns which are at risk - buildings, vehicles, personal property (the business items in your buildings), payroll (which shows the size of your operation), number of officers, size of the jail and more. If you add a new building, your property insurance costs will increase from the prior year.

Claims experience is not just how your claims played out the last year. Insurers will look at five or maybe even ten years of experience. Their actuary will calculate your most likely claims experience for the coming year, and will also factor in a contingency just in case the next year is a really bad year for your claims. Consistently high claims costs will very much compound your insurance costs.

Administrative costs can vary greatly. This is the cost of the insurer doing business, and includes staffing, technology, training and other services.

Profit is pretty easy to explain. When the stock market was booming, insurers were happy to earn profit off the funds they held in anticipation of paying claims - they were making money holding your money. In that scenario they could have claims and administrative costs which equaled the premium they collected, knowing that most of the claims payments were made over time (especially for work comp and liability claims). With the return on investment much lower now, insurers have had to consider building profit into their rates, which of course drives prices up.

Public entity risk pools, such as CCAP's UC Trust, PComp, PCoRP, PELICAN, COMCARE PRO and Health Alliance, don't need to build profit into the cost equation. Any monies not needed to fund operations and pay claims are either held in surplus for "rainy days" (and earn interest for the pool) or are returned to the members. And since the members own the pool, any surplus accrues to them in the short or long term, and can be used to keep rates low.

Each year we are asked by the members of CCAP's Insurance Programs to estimate what costs will be in the coming year. Here are our best guesses for 2014. Keep in mind your county's individual claims experience and exposure changes will be a major factor in your specific costs: 

• Unemployment - claims have been stable and not as high, expect an overall increase but probably less than ten percent.
• Workers' Compensation - PComp has continued to see fairly average claims costs. Plan on a small increase, hopefully no more than five percent.
• Health Insurance - the Health Alliance is estimating costs will increase an average of eight to ten percent in 2014.
• Property and Liability - PCoRP is financially strong and claims remain very close to predictions. Members can anticipate a small overall increase, less than five percent.
• Nursing Home Liability - PELICAN members continue to do well with their claims experience. We are hoping for no rate change for 2014.
• Behavioral Health stop loss - COMCARE PRO's claims have been as expected, and costs are expected to remain flat or slightly increase for 2014. 

Questions or comments? Contact Karen Cohen, CCAP's Property and Casualty Programs Manager.