THE shire saving almost $700,000 on its insurance for this financial year occurred due to a number of factors including a more competitive insurance sector.
The News reported on 30 June that the savings came from putting its insurance out to tender rather than staying with MAV Insurance.
The windfall was revealed when councillors approved the budget in late July and added 10 items totalling $600,000 after saving $690,230 on the estimated cost of insurance.
The items included sealing a car park in Mornington, a contribution for an access road near Tyabb airfield, money for cliff stability at Safety Beach and cash for music, art, sport and a history project.
But the saving was not all down to changing insurers.
MAV president Cr Bill McArthur told The News the MAV Insurance quote provided to the shire for public liability and professional indemnity as well as fidelity insurance was “below $700,000, not $1.5 million”.
“This means it was impossible for the council to save $700,000 by choosing another insurance provider over the MAV,” he said.
(Fidelity insurance is taken out by an employer against losses incurred through dishonesty by employees.)
The shire’s interim chief financial officer Matthew Hubbard said the budget estimate of $1.5 million (which excluded workers compensation) had been prepared some months earlier “on the basis of conversations held with the shire’s insurance broker”.
“The discussions included an assumption about continuing with the same levels of cover, consideration of the claims history over the preceding 12 months, the actual premiums paid for 2014-15 cover ($1.25 million) and expert opinion as to the likely percentage increases to be applied based on the broker’s projections about the market at the time,” he said.
He said the classes of insurance considered included industrial special risks, public liability and professional indemnity, motor vehicles, councillors’ and officers’ liability, and corporate travel.
“The shire had not received detailed quotations from the MAV or other providers at the time of exhibiting its draft budget.
“Between the time of preparing and aggregating those estimates and the adoption of the final budget, a supplementary insurance adviser was appointed to assist with conducting a comprehensive risk review.
“An open tender exercise (on behalf of the shire and a number of other councils) was undertaken, attracting bids from alternate underwriters.”
Mr Hubbard said that during this time “conditions in the insurance underwriting market changed with some softening observed as well as increased appetite, and hence competition, for the local government sector by underwriters”.
“The combination of these factors contributed to the significant savings achieved compared to the estimates for insurance premiums included in the proposed budget exhibited in April-May.”
The shire has appointed AON as its principal insurance adviser and has cover with CGU, Lloyds of London, Chubb, QBE, Vero and Allianz.