Through accessing independent advice and leveraging the competitive insurance market, many local government councils are reducing insurance costs and freeing-up valuable funds for the benefit of their communities.
In an era of diminishing federal and state government grants, the emergence of rate-capping in some jurisdictions, annual increases in operating costs, and greater ratepayer and community expectations, many local government councils face considerable financial challenges. As a result, there is greater pressure on procurement teams to achieve best value for money.
With the cost of insurance premiums such a major component of local government operating budgets, a growing number of councils are testing the competitive insurance market. For many the exercise is about achieving significant reductions in insurance premium costs, but most are also reviewing existing policies to ensure their insurance cover is adequate, and that there is an optimal balance between retained and transferred risk.
Paul Crapper, National Head of Local Government for Aon Risk Solutions (and a former Director of Corporate and Planning Services in local government), says that in the past 12 months he and his team have helped numerous councils evaluate the competitive insurance market. He expects many more councils to take a similar route before they finalise their budgets for 2016/2017. “This approach is simply good governance and reflects the efforts of many councils to become more commercial in the management of their financial resources.”
Looking beyond the mutuals
“Through our discussions with councils we discovered that many were not aware of the alternatives available to mutual insurance schemes. However the current competitive insurance market is enabling some astute councils to save hundreds of thousands of dollars through solutions that are tailored to their needs, which can offer as good as (or better) insurance cover than their current arrangements.”
Real savings through independent benchmarking
To assist councils with decisions on their insurance procurement, Aon offers a complimentary, independent insurance premium benchmarking service. Paul Crapper emphasises that the role of a broker such as Aon, is to provide transparency and to work in a collaborative and trusted advisor partnership with each council. “We act as the council’s advocate, not on the insurers behalf.”
In addition, unlike the ‘one size fits all’ approach of mutual pool insurance schemes, Aon provides non-conflicted advice that matches each individual council’s risk profile to help locate a ‘fit-for-purpose’ insurance program. “Testing the commercial market conditions by obtaining non-binding indicative insurance premiums, based on a council’s current insurance, shows that a minimum of 20% in premium cost savings (subject to claims history) is more than achievable. Such savings are delivering a win-win for councils and their ratepayers.”
An example of this is a recent case study of a Victorian local government authority that Aon helped to save almost $700,000 against their 2015/2016 draft budget. This freed-up valuable funds for much-needed community projects and programs which would otherwise not have been funded until next year. (The full case study, together with other leading risk insights and insurance information, can be accessed at connect-aon.com.au)
Helping you make well-informed risk and insurance decisions
Aon’s dedicated local government team has experience of working in, as well as with, local government councils. In addition to the complimentary benchmarking exercise, they offer fee-for-service professional advice, to both Aon clients and non-clients, which includes: insurable risk profiling; insurance cover gap analysis; loss limit modelling and deductible/retention analysis. This advice is at arm’s length to any insurance products or solutions and helps councils make confident, well-informed risk and insurance decisions.
With over 80 local government clients across Australia and New Zealand, the team delivers value by creating competition amongst insurers. “We understand the importance of choice and the need to offer non-conflicted, transparent advice delivered within a robust governance procurement framework. We have developed solutions across a diversity of Australian Prudential Regulation Authority (APRA) regulated (or supervised), and Standard and Poor’s 500 (S&P) rated insurers — locally and globally — that allow our clients to access tailored products that meet their specific risk needs.”
To discover how Aon can assist your council achieve best value-for-money insurance procurement through independent advice or a complimentary benchmarking exercise, contact Paul Crapper on (03) 9211 3313 or paul.crapper@aon.com
© Aon Risk Services Australia Limited 17 000 434 720 (Aon) 2015
Aon has taken care in the production of this document and the information contained in it has been obtained from sources that Aon believes to be reliable. Aon does not make any representation as to the accuracy of the information received from third parties and is unable to accept liability for any loss incurred by anyone who relies on it. The recipient of this document is responsible for their use of it.
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