The Kane County Forest Preserve District considers itself fortunate to be paying nearly 60 percent more this year for insurance on its patrol cars, trucks and other vehicles.
The alternative to accepting a $20,000 increase in the annual premium would have been no coverage at all, said Robert Quinlan, district finance director.
“Our agent told us the carrier was uncertain whether it wanted to be in the liability business,” Quinlan said. “We were lucky to get any rate this year.”
Many cities, villages, park districts and other local government agencies in this area have been hit with similar increases in recent months–sometimes paying significantly higher rates for less insurance to cover damage to or loss of property and to protect against liability or worker’s compensation claims.
Evanston, for example, is paying about $200,000 this year, double what is paid last year, for an umbrella liability insurance policy that provides $10 million in coverage. The city would have preferred $20 million, said William Stafford, Evanston’s finance chief.
The deductible–what the city pays before the insurance kicks in–increased to $1.5 million from $1 million.
“We’re paying twice as much for less coverage,” Stafford said.
The insurance industry blames the higher premiums in part on the losses it experienced last year, including those resulting from the terrorist attacks on Sept. 11 as well as from natural disasters such as Tropical Storm Allison, which ripped through Texas in June.
Not counting the terrorist attacks, catastrophic losses last year amounted to $7.5 billion, according to the New York City-based Insurance Information Institute.
Insurers also have seen lower returns on their investments because of the economic downturn.
But some of the lessons that municipalities learned during the liability insurance crisis in the mid-1980s–when coverage was hard to get at any price–seem to have softened the impact of the higher rates.
More local governments are self-insured these days for losses up to a certain amount. Others participate in what are called risk pools, which essentially are self-insurance groups.
Though cities and villages are absorbing the higher insurance costs, the added expense is coming at a difficult time because revenues from sales taxes and the local share of the state income tax have declined.
Some park districts are faced with the option of raising fees or buying less insurance because they are bumping up against the limits imposed by the state’s property-tax cap legislation.
“It’s not a major impact. But it does have an impact,” said Thomas Borchert, city manager in Elmhurst, which is paying about $103,000, or 40 percent more than last year, for umbrella coverage. “It’s another example of expenses going up and revenues going down.”
Elmhurst is self-insured, paying up to $250,000 to cover each loss from its reserves. It buys insurance to protect itself against losses that exceed $250,000.
Insurers also have become reluctant to offer some types or levels of coverage, said George Kobe, finance director for DuPage County.
In 1999, DuPage County government paid $550,000 for a three-year umbrella liability policy that offered $50 million in coverage. When the policy expired Dec. 1, county officials learned that the cost to renew was almost that amount, $525,000, for only one year. Coverage dropped to $30 million, and the deductible increased to $1.5 million from $1 million.
Airports also are facing higher insurance costs. The premiums being paid by Chicago for property and liability coverage this year at O’Hare International and Midway Airports have more than tripled, while insurance costs at DuPage Airport in West Chicago nearly doubled, to more than $286,000 from roughly $145,700 in 2001.
The higher premiums, which come after several years of lower rates and expanded coverage, have triggered renewed interest in insurance pools.
“We noticed six or seven months ago that we were starting to get more inquiries,” said Sal Bianchi, executive director of the Oakbrook Terrace-based Intergovernmental Risk Management Agency, which was started in 1979.
The agency’s 74 members, mostly city and village governments in the Chicago area, contribute to a fund that provides them with insurance coverage.
The Springfield-based Illinois Municipal League also offers a pool for its members.
Pools often work with members to identify potential hazards in an effort to reduce risks and losses.
Evanston’s Stafford said the city is considering participating in a pool.
“When premiums start to double and coverage is less than what it was,” he said, “that’s one of the options you need to start to look at.”
