Purpose

Cabinet is recommended
to approve the procurement of contracts for the Council’s
insurance services for the period 01 April 2024 to 31 March
2029.
 

Content

Cabinet:

(1)           
approved the procurement and tender process for the Council’s
insurance services for the period 01 April 2024 to 31 March 2029;
and

(2)           
delegated the award of contract(s) to the successful
provider(s) to the Strategic Director of Resources.
 

OPTIONS & ALTERNATIVES CONSIDERED
Procure insurance via
a framework agreement
A framework agreement for insurance services
is in existence, providing access to 19 insurers who have been
pre-qualified thereby saving time by not having to conduct a full procurement exercise.
Although the framework includes a large number of
suppliers, the number specifically for local authorities and social
housing providers is fairly small and not all insurers are party to
the framework.  This would mean that we
would not have access to all of our potential suppliers.
 
This route would also not be cost effective as
the provider charges for the use of the framework.

Join a
Mutual

Mutuals generally
work when there is no market available, i.e. insurers do not like
underwriting a particular sector or classes of business, or simply
do not provide cover at any costs.

Currently no
operational mutual exists within the public sector to cover the
risk we are seeking to insure against. 

Form a
Captive
A captive is
an insurance company owned and controlled by those it
insures.  It only insures the risks of the owners. Those who
are insured are able to benefit from the underwriting profits that
are collected.  It could keep costs centralised and provide an
option to manage the Council’s risks by underwriting our own
insurance, thereby reducing the number of premiums that must be
send out to third-party insurers, providing more overall
control.
 
In the case of the
Council, it is too small an organisation to benefit from any of the
advantages as the costs would most likely outweigh any potential
savings.  In addition there is no
opportunity to spread out the risk and the total costs can vary
greatly each year, making it difficult to budget.
 
Fully self-insure
Full self-insurance would mean that the
Council eliminates its premium costs, which invariably include an
insurance company’s overheads for policy administration,
assumption of risk and underwriting profits as well as insurance
premium taxes.

The disadvantage is that due to the Council’s
exposure to claims, a fully self-insured programme is likely to
cost more than insuring in the traditional insurance
market.  With self-insurance, capital
must always be available in reserve if there are claims that must
be paid.  Should the Council
underestimate its’ reserve level, there may not be enough
funds available to provide an adequate level of
protection.  This means that the Council
would need to ensure that this reserve was adequate at all times,
otherwise it could put Council services at risk.

 

Do nothing
This would mean the contracts run out
effective 01 April 2024 and the Council would be in a self-insured
position as described under point 4.4 in the report.