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What is the League of Minnesota Cities Insurance Trust?
BackgroundFor over 20 years, Minnesota cities have relied upon the League of Minnesota Cities Insurance Trust (LMCIT) for their property, liability, workers’ compensation, and employee benefits needs. We are a member-driven organization that exists solely to meet the risk management and insurance needs of Minnesota cities. LMCIT is a cooperative joint-powers organization formed by Minnesota cities in 1980 — one of the first municipal self-insurance pools in the country. Cities contribute premiums into a jointly-owned fund rather than paying premiums to buy insurance from an insurance company. The money in that fund is then used to pay for member cities’ claims, losses, and expenses. City participation varies by program.
The private insurance market runs in cycles. Sometimes insurance is relatively cheap and easy to get. At other times, as in the late 1970s and again in the mid- and late-1980s, insurance can become very expensive and hard to obtain. In a “hard” cycle, if insurance companies view cities as undesirable or unpredictable risks, cities may not be able to find insurance at all. In the late 1980s, this happened to cities in many parts of the country in regard to property casualty coverage. Because LMCIT exists, Minnesota cities know they will have a stable source of insurance coverage —- regardless of private insurance industry cycles. Furthermore, cities have some unique needs that private industry’s insurance doesn’t address very well. LMCIT’s coverages are specifically designed for cities. As new needs or problems develop, LMCIT modifies coverage or develops new programs to meet those needs, such as workers’ compensation coverage for benefits mandated by the state for peace officers suffering from post-traumatic stress syndrome. LMCIT is different from an insurance companyIn some ways, LMCIT functions much like an insurance company. Cities pay a premium to LMCIT and LMCIT pays claims and losses on the city’s behalf. However, there are a couple of very important differences. LMCIT is owned and controlled by the member cities themselves. Its purpose is to meet cities’ coverage and risk management needs —- not to make a profit by selling insurance. And in the property/casualty and workers’ compensation programs, if LMCIT’s income from premiums and investments is more than what is needed for losses and expenses, the extra funds go back to the member cities. From 1987 to 2001, LMCIT has returned $148 million in dividends to cities! Another example of how LMCIT differs from the private insurance is the bleacher safety loan program. This loan was developed to help cities make the changes to comply with the 1999 bleacher safety legislation, and has since been expanded to be used in a variety of safety-and security-related, unforseen expenses. LMCIT is safe and secureTo ensure that LMCIT is able to meet its responsibility to pay cities’ claims, LMCIT’s Trustees see it as absolutely critical that the organization be strong and financially stable. A conservative approach to rates and reserves, a solid reinsurance program with some of the strongest reinsurers in the world, and regular actuarial reviews all help ensure that LMCIT will remain sound. In fact, by conventional insurance industry measures, LMCIT is stronger financially than most insurance companies. The Board of Trustees leads the Insurance Trust.The LMCIT Board of Trustees is appointed by the League’s Board of Directors.
Lester Heitke, Chair
The local agent roleLMCIT requires cities to use the services of a local agent for the property/casualty program, but the choice of the agent is entirely up to the city. Most cities also use an agent’s services for workers’ compensation. The agent’s role in LMCIT is not so much to act as a salesperson for LMCIT, but rather to assist and advise the city. LMCIT strongly encourages cities and agents to discuss services an agent might provide and the appropriate compensation for those services. Coverage for city needsLMCIT offers property/casualty, workers’ compensation and employee benefits insurance programs that meet cities needs. The Property/Casualty program provides a broad package of liability, property, and auto coverages. The liability coverage is very broad, and provides the equivalent of general and law enforcement liability, and public officials’ errors and omissions. It also includes other liability coverages that most cities need, such as land use and development coverage, and extraordinary expense coverage, designed to address a wide variety of unanticipated and extraordinary expenses that no other coverage would cover. The property/casualty program has a wide variety of deductible options and optional coverages such as:
The Workers’ Compensation program covers city employees, with deductible, retro-rated and managed care coverage options. It also offers optional volunteer accident coverage, which protects individuals who are injured while providing volunteer services to the city. LMCIT’s workers’ compensation coverage also picks up some related risks that standard workers’ compensation insurance policies don’t cover. Some examples of LMCIT coverages specially designed for cities are:
Employee Benefits program keeps city interests at the forefront of its activities in an era of increasing premiums and high health care costs. While LMCIT no longer provides health and dental insurance for cities, we provide information, training and advice about benefit plan designs, contribution structures, and assitance in soliciting and evaluating benefit proposals. LMCIT assists cities with COBRA administration, helping cities develop internal policies, procedures and documentation to ensure compliance with state and federal continuation of coverage requirements. LMCIT does offer coverage options for life and short- and long-term disability insurances, which are available for purchase by both employer and employee, so that a city might provide baseline coverage and allow employees to add coverages individually. Additionally, LMCIT has expanded the employee benefits program to include long-term care insurance. Long-term care coverage pays for in-home care and nursing homes, protecting employee retirement assets by paying for services that might otherwise drain savings. Coverage is available to city employees, their spouses, parents, parents-in-law, grandparents and retirees. This program featuers voluntary employee enrollment and no required city contribution, and offers similar benefits to those offered to State of Minnesota employees. LMCIT emphasizes loss control to save moneyRemember, the money LMCIT uses to pay claims belongs to the cities themselves — every loss that is avoided saves money! To help cities minimize risks and avoid losses, LMCIT offers the Safety and Loss Control Workshops on an annual basis, distributes the Loss Control Quarterly, and provides the assistance of loss control consultants to cities on an individual basis. Index of LMCIT Annual Reports
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