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The Pool and the Fund
Local governments in Michigan have been pooling insurance risks for decades. For example, the Michigan Municipal League Liability and Property Pool and the Workers’ Compensation Fund were formed in the late 1970s and early 1980s in response to drastic increases in pricing and the lack of availability of traditional coverage through the commercial insurance industry; the industry had decided that local governments were a poor risk, and simply walked away. They returned a decade later, only to once again pull back following the 9/11 disaster. Now they want municipal business once again.
Looking to put excess capital to work that has been built up following several relatively catastrophe-free years, some commercial carriers are attempting to buy municipal business with drastic, and unsustainable underpricing, that bears little relationship to the actual risk assumed. The low-ball pricing is often accompanied by coverage limitations that on the surface appear technical—that is, until the lawsuit is filed. Several carriers have already begun pulling back from the Michigan marketplace, while a few others will continue to price irresponsibly—inevitably leading to huge price increases or cancelled coverage when the next big natural disaster hits or when their pricing mistakes again turn them sour on municipal risks as losses mount down the road.
League insurance program members pool funds to pay for a variety of losses that local governments face—everything from personal injury, employment and land use lawsuits, to property claims, police liability, automobile and workers’ compensation—and work together to reduce the risk of losses. The programs are owned and controlled by their member communities through a representative board of directors, and are administered by the Michigan Municipal League. Over 800 local governments now participate in one or both of the programs, which have combined assets of $200 million and annual premiums totaling $50 million.
Refunds and Stable Premiums
Excess funds that are collected are returned to members in the form of rate reductions, dividends, improved services or enhanced coverage. The League Workers’ Compensation Fund has returned in excess of $150 million to its members since its inception, or almost 30 percent of the total premiums collected—dollars which would otherwise have been lost to commercial insurers. Stable premiums have also been a hallmark of the programs: total member contributions to the Liability and Property Pool are about the same as they were a decade ago, and average Workers’ Compensation Fund rates per $100 of payroll are actually lower! The League's numerous innovations include professional law enforcement risk reduction staff and resources, specialized expertise in municipal claims and legal defense, unique coverages designed to address the risks faced by local governments, and a variety of risk reduction resources and publications for local officials.
Group Health Insurance
Members of the Michigan Municipal League and the Michigan Townships Association also joined together beginning in 1987 to form a group-sponsored arrangement for health insurance through Blue Cross Blue Shield of Michigan. Now almost 400 members strong, and protecting almost 6,000 municipal employees and their families, local governments enjoy the advantages of pooling—BCBSM groups together approximately 400,000 contracts from several industry groups into a "pool"—with the financial strength, purchasing leverage, and service of Blue Cross. Because municipalities tend to have somewhat older employees and a great percentage of retirees than other industry groups, we believe that partnering in this way with Blue Cross is the most cost-effective way to service our membership.
The Michigan Municipal League Liability & Property Pool, Workers’ Compensation Fund and group sponsored BCBSM health insurance purchasing alternative have grown to be among the largest, most well respected and financially sound risk management programs in the country, and continue to represent intergovernmental cooperation at its best.
Michael Forster is the director of Risk Management Services for the League. You may reach him at 734-669-6340 or