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REPORT OF THE CITY TREASURER
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TO THE: LEAD MEMBER of FINANCE AND SUPPORT SERVICES
ON: Monday 19thDec 2011
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TITLE:Procurement ofCouncil’s Insurance and Risk management services
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RECOMMENDATION:
Lead member is requested to note the contents of the report and give permission to extend the Council’s existing insurance broker contract and to jointly procure a shared brokerage with other interested councils.
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EXECUTIVE SUMMARY:
The existing broker long term agreement is due to end on the 30th of June2012.Permission for an extension until the 30th Sep 2012 is now being sought; following joint discussions with our own and Manchester City Council’s (MCC) in house procurement teams,in relation to a joint initiative to purchase and share a brokerage service with other interested Councils.
Initially Manchester City Council along with Rochdale Borough Council agreed to jointly purchase a shared service. MCC who are leading on this initiative propose to open up this offer to all councils in the North West via the AGMA group. In the meantime if permission is granted by lead member at Salford for the above proposal there will then be three interested councils (including Salford City Council) collaborating to jointly tender for a new shared brokerage service in the newyear.
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BACKGROUND DOCUMENTS:
(Available for public inspection)
- Institute of Risk Management (IRM) / Association of Insurers & Risk Managers (AIRMIC) /Association of Local Authority Risk Managers (ALARM) produced A Risk Management Standard.
- Risk Management Strategy Sep2011.
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KEY DECISION:No
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DETAILS:See report attached.
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KEY COUNCIL POLICIES: N/A
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EQUALITY IMPACT ASSESSMENT AND IMPLICATIONS:N/A
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ASSESSMENT OF RISK:
Insurance cover is purchased as a risk transfer mechanism where the authority feels there is too much exposure to risk in funding a potential occurrence.
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SOURCE OF FUNDING:Existing revenue budget.
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LEGAL IMPLICATIONS:Tony Hatton.
In view of the relatively short period of the extension, the value of the contract extension period, and the fact that the brokerage service concerned will be subject to a formal tender process without any significant delay, to allow other service providers the opportunity to tender for the new contracts which will start in October 2012, the risk of any challenge is minimal.
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FINANCIAL IMPLICATIONS: Are covered in this report.
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PROCUREMENT IMPLICATIONS: Christine Flisk.
Procurement investigated the possibility of joint collaboration with other AGMA authorities.A fully compliant procurement activity will be undertaken to ensure a framework/ contract is in place for 1 October 2012.
OTHER DIRECTORATES CONSULTED:N/A
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CONTACT OFFICER: Cliff PeacockTEL. NO. 0161 6076980
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WARD(S) TO WHICH REPORT RELATE(S): N/A
1. / REPORT1.1 / BACKGROUND
With regard to our current brokerage and the proposed joint procurement all three Councils are currently with AON;contracts are due to end between now and the 30th Sep 2012 31st of September 2012 therefore all authorities wishing to join this new initiative will need to extend their existingarrangements as appropriate to ensure that they are co-terminus with October 2012.
SCC’s current annual brokerage fee is £20K. Aon’s service at Salfordincludes a delivery of a range of support services through a small number of primary contacts. An overview of their service provision at Salford includes:
- Twice yearly meeting and adhoc meetings on issues as required e.g. Regular review meetings to monitor new exposure and changes in business activities
- Meetings to advise on specific issues related to new assets and capital projects
- Review of insurance contracts and evaluation of uninsured areas
- Day to day guidance on insurance issues
- Risk marketing/Broking which gives us access to regional, London and specialist markets
- Pre – renewal strategy and review meetings
- Preparation of professional market submissions and cost analysis
- Day to day support with insurers
- Proactive advice on market conditions and legislative changes
- Provision of Policy documentation ,certificates and cover summaries
- Add hoc claims advice and policy interpretation.
A Service Level Agreement with AON reflects their core service. It used as a standard for measuring the value of AON’s fee. Agreement is annually reviewed to assess how the team has performed against client expectations.
1.2 / APPOINTMENT OF A BROKER AND FUTURE PROVISION OF INSURANCE
If approved it is hoped that an appointment would be made by the early October 2012. The cost per authority it is estimated would be £10- 15K and can be met within existing budgets at Salford. The cost of extending for three months at SCC is estimated at £5K.
There may well be cultural differences between Councils related to risk taking and stop loss arrangements. Requirements for differing levels of service provision that match the expertise of the insurance officer my may mean a more complex fee arrangements therefore aligning core services with costs may not be simple at first and may have to be bedded in over a twelve month period.
The proposal seeks to deliver good value for money and using a joint approach will achieve this over time. As well as making the Council more efficient,the proposals would facilitate anyfuture joint procurement of insurance.
1.3 / PERFORMANCE ISSUES
Additional value is being sought from the proposed new contract as well as improved review arrangements. The costs of the new contractis anticipated to be lower than the current arrangements which annually cost £20K at Salford it is anticipatedthat the charge for 2012-13 will provide a saving on this budget.
Salford is still committed to the principal of investigating an Insurance Framework agreement with other councils, via AGMA and this new initiative is yet another strand.
1.4 / CONCLUSION
An extension to the current contract is requested so that the proposed partnership for the procurement of an insurance broker, which would deliver an immediate saving, can be undertaken. It is anticipated that this joint arrangement willprovide for combined buying power and thus achieve realistic savings on insurance costs in the future. A further report on arrangements and progress will be brought to a future Lead member meeting.
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