Public entity risk pools are becoming more flexible with the types of coverage they offer to members as municipalities strive to deal with evolving risks on tight budgets.

Many pools have begun to offer cyber liability protection, unemployment compensation insurance and employee benefits coverage in recent years, and such groups continue to look for insurance solutions that fit the unique needs of their members, experts say.

“What we've seen in the current economic challenges is that pool boards are more receptive to new ideas and product offerings that can offer efficiency and cost savings,” said Daniel Howell, senior executive vp and managing director of the public entity group at brokerage Alliant Insurance Services Inc. in San Francisco. “Many pools began in response to the public entity liability insurance crisis of the mid-1980s, and their initial offerings were directed at solving that problem. Now their members are looking to risk pools to offer more options.”

Michael G. Fann, director of loss control for the TML Risk Management Pool in Brentwood, Tenn., said his pool added cyber risk liability coverage this year based on requests from the pool's 490 member entities. The pool also recently added medical and workers compensation coverage for volunteer paramedics and emergency medical technicians after providing similar insurance for volunteer firefighters and police officers during the past few years.

Mr. Fann said the additions are based on an increasing awareness of cyber liability, and a growing interest among some members to protect volunteer first responders as the down economy increases the use of such services.

%%BREAK%%

“Just as the exposures change, we try to tweak our coverage documents and coverage availability to meet the needs of our members,” Mr. Fann said.

Harold Pumford, CEO of the Assn. of Governmental Risk Pools in Prague, Okla., said flexibility in coverage has helped lead to a slight membership growth for public entity pools.

The association estimates that about 85% of public entities belong to a public risk pool. Mr. Pumford said pool membership is up to about 75,000 entities nationwide, compared with about 74,000 during the past few years.

Mr. Pumford said he has noticed more pools offering employee benefits coverage in the past several years, adding that pool insurance lines are continuing to evolve.

“I think that the great value of public entity risk pooling to the member entities is they get to design a program that meets their needs and meets their objectives,” Mr. Pumford said.

In addition to adding coverages to protect members, public risk pools have shifted their risk management strategies in order to assist members in preventing claims and mitigating losses.

Alliant's Mr. Howell said enterprise risk management is becoming a growing trend among public entities as risk management budgets and staffing have been cut during the economic downturn.

“The enterprise risk management model is taking hold as public entities are reorganized and face the reality of their cost of risk,” he said. “Risk managers are wearing more hats and expected to deliver value on more fronts than ever before.”

%%BREAK%%

It's a trend that Mr. Fann has seen in his own pool. In the past few years, he said he has noticed police chiefs, fire chiefs and other non-risk management officials getting involved in risk management discussions in hopes of helping their municipalities keep risks and loss costs in check.

“They're trying to spread the expertise a little bit and trying to grow the knowledge base of how to manage risk appropriately at the local level,” Mr. Fann said.

Paul Miola, area executive vp at Arthur J. Gallagher & Co. in Marlton, N.J., said he has seen an increased focus on wellness initiatives among public risk pools that work with the brokerage. He said such groups see employee health as a way to help reduce growing workers compensation costs, and some pools are hiring wellness directors to lead health initiatives.

“If you look at any pool, the largest claims stream comes from workers compensation,” he said. “So (they're) looking at tightening up physicians networks, focusing on the reporting times for claims, getting more case management intervention earlier on...for claims that have potential to be difficult.”

Implementing new risk management strategies can be a tough proposition for cash-strapped municipalities, said John Brockschmidt, Southfield, Mich.-based president of York Risk Pooling Services, a division of York Risk Services Inc. in Parsippany, N.J. The company is a third-party administrator for several risk pools, mostly in the Midwest.

Mr. Brockschmidt said he expects public risk pools will keep looking for cost-effective risk management strategies, because budget pressures are expected to continue for the next couple of years.

“It's a balancing act because some loss control measures take money, and the money may not be there as it was in the past,” Mr. Brockschmidt said. “Conversely, everybody recognizes anything you can do to mitigate risk in the long run saves money.”