A Better Mousetrap
Martin Brady and his colleagues at the Sacramento, Calif.-based Schools Insurance Authority have a saying.
It’s this: “Our ultimate customers are 3- to 4-feet-high and carry lunch buckets,” Brady said, describing the core mission of the authority, managing risk and providing insurance coverage for 35 public school districts in Central and Northern California.
So when faced with a 10 percent increase in excess casualty insurance rates from the dominant carrier in the market — which on top of that was only offering a one-year guarantee — Brady, executive director of the agency, and his colleagues knew something had to be done.
They knew that the bane of a public school administrator’s existence is cost volatility.
“The public agencies were finding themselves squeezed and we thought, ‘There has got to be an alternative to this and what can we do that is creative and out of the box?’ ” Brady recalled.
“We are not motivated by profit. We are motivated by quality and being the best that we can possibly be.” — Martin Brady, executive director, Schools Insurance Authority
Brady got into discussions with the California State Fund, the quasi-government carrier, to see if the interests of the two agencies could align well enough to find a solution. And a solution was found.
Working with the State Fund and with the support of Dave Jones, the California insurance commissioner, the office of Gov. Jerry Brown and Christine Baker, the state’s director of the Department of Industrial Relations, Brady created an excess casualty program for the authority members’ most catastrophic claims.
The program features a self-insured retention of $1 million up to the statutory limit.
“So it really is above the burn layer and it protects the state fund as well,” Brady said.
“It truly is catastrophic if it gets up to that level. Those events are rare and we want to make sure that we block and tackle down low at the primary level,” Brady said.
It also features stable pricing for the predictable future and one other shining attribute: dividends.
The Schools Insurance Authority is eligible for dividends of between 7 percent and 10 percent of premiums paid going forward.
“The State Fund is an organization that has been around. It is very stable because of its size and they also provide dividends to their members. So they were open for us being a participant on the dividends, which would never happen with a private carrier,” Brady said.
“It took us 10 months of working through the regulatory channels but it has made a predictable market for the future,” Brady said.
Brady got into discussions about this solution in early 2013. The program went live in July of 2014. And then a funny thing happened. The dominant carrier changed its tune.
“Instead of a 10 percent increase across the board it was a 10 percent decrease and instead of a one-year guarantee it was a two-year guarantee,” Brady said.
To support the excess program and ensure better health of the joint powers authority overall, Brady and his team are endeavoring to create a best-in-class claims program. That blocking and tackling we referred to earlier — that means “paying people well” and limiting claims caseloads to 100 per desk.
“All in all, it really has been a remarkable impact we have had in saving schools millions,” Brady said.
“We are not motivated by profit. We are motivated by quality and being the best that we can possibly be,” Brady said.