National Academies Press: OpenBook

Shared-Risk Insurance Pools for Transit Agencies: A Guide (2023)

Chapter: Appendix D - Pool Best Practices

« Previous: Appendix C - Fundamental Factors That Contribute to Shared-Risk Pool Success
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Suggested Citation:"Appendix D - Pool Best Practices." National Research Council. 2023. Shared-Risk Insurance Pools for Transit Agencies: A Guide. Washington, DC: The National Academies Press. doi: 10.17226/27419.
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Suggested Citation:"Appendix D - Pool Best Practices." National Research Council. 2023. Shared-Risk Insurance Pools for Transit Agencies: A Guide. Washington, DC: The National Academies Press. doi: 10.17226/27419.
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Suggested Citation:"Appendix D - Pool Best Practices." National Research Council. 2023. Shared-Risk Insurance Pools for Transit Agencies: A Guide. Washington, DC: The National Academies Press. doi: 10.17226/27419.
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Page 53
Page 54
Suggested Citation:"Appendix D - Pool Best Practices." National Research Council. 2023. Shared-Risk Insurance Pools for Transit Agencies: A Guide. Washington, DC: The National Academies Press. doi: 10.17226/27419.
×
Page 54
Page 55
Suggested Citation:"Appendix D - Pool Best Practices." National Research Council. 2023. Shared-Risk Insurance Pools for Transit Agencies: A Guide. Washington, DC: The National Academies Press. doi: 10.17226/27419.
×
Page 55
Page 56
Suggested Citation:"Appendix D - Pool Best Practices." National Research Council. 2023. Shared-Risk Insurance Pools for Transit Agencies: A Guide. Washington, DC: The National Academies Press. doi: 10.17226/27419.
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Page 56

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D-1   The objectives of this Guide are to assist in deciding whether a transit risk insurance pool is advantageous for any given group of transit provider agencies, and (if the answer is affirmative) to provide guidance in establishing a pool and starting up operations. It is beyond the scope of the Guide to advise on the ongoing operation and improvement of the pool. However, several best practices for pool operation arose in discussing the establishment and operation of the pool, and three sets are set out in this appendix: 1. A group of suggestions for successful pool operation that may influence the establishment and startup, ranging from conservation of pool capital to marketing pool services to main- taining and cultivating pool membership. 2. A marketing satisfaction survey to assess the level of membership satisfaction, assess the need for marketing programs and campaigns, and identify areas that warrant service improvement. 3. Selection scoring tools for procuring pool management and for procuring service providers. Suggestions for Successful Pool Operations Adapt Services to Meet Pool Member Needs. For example, one type or format for training may work for one member but not for another; flexibility, openness, and a willingness to respond according to the situation are necessary for managing a shared-risk pool. Awareness. Member satisfaction surveys can help the pool increase communication and ser- vice levels by evaluating its services against member expectations. Such knowledge is critical to gaining cooperation and building trust among all interested parties. Consider using a “member satisfaction” survey (see the following sample). Board Members Will Rely Heavily on Pool Management. They are the shared-risk experts the pool has retained to run a pool. “Trust but verify” is good advice when working closely with pool management; independent audits should be used for verification. Act early on indicators identifying performance and trend analysis inconsistent with pool expectations. Consider Employing a Risk Management Information System (RMIS). An RMIS facilitates consolidating information related to the pool, such as claims, property values, coverage document information, and exposure information, into one system. This information is essential for managing individual claims, identifying trends, marketing a pool’s program, loss forecasting, actuarial studies, and internal loss data communication. An RMIS may also provide tracking and management reporting capabilities to help the pool monitor and control the overall cost of risk efficiently and cost-effectively; see a list of RMIS vendors in the References and Resources section. Consider Using a Scorecard or Another Formal Evaluation Process for Selecting Pool Management. This will avoid built-in bias and focus the decision process on the needs and priorities of the pool members. A sample pool management scorecard tool is provided in Table D.1 to assist in selecting pool management. A P P E N D I X D Pool Best Practices

D-2 Shared-Risk Insurance Pools for Transit Agencies: A Guide Consider Using a Scorecard or Other Formal Evaluation Process for Selecting a Pool Service Provider. This will help avoid built-in bias and focus the decision process on the needs and priorities of the pool members. A sample service provider scorecard tool is pro- vided in Table D.2 to assist in selecting one or more service providers. Cultivate and Develop Board Members, Pool Management, and Pool Members through Training. Training and development are critical areas of pool management. Training and development are the primary ways the pool’s performance and individuals improve. Develop and Circulate a Pool Operations Manual. Once pool management and the board understand the pool’s activities, an operations manual can be created. It should address all the pool’s functional activities, such as accounting, underwriting, risk management, claims management, operations plan, fronting and excess commercial coverage, and regulatory requirements. It does not need to replace information; its purpose is to ensure that pool management, the service provider, and pool members understand the fundamental aspects of pool operations. Employ a Disciplined Claim Reporting Process. Claims sources must be managed effec- tively to minimize loss. Timely reporting of claims is essential. Failing to act quickly in the aftermath of accidents often means evidence could be lost, which degrades analysis and decision-making in the overall claims management process. Marketing. To retain membership and grow the pool, it’s essential to keep members and prospective members aware of pool successes and remind them of pool services because member satisfaction is not limited to pricing. Pools need to remain relevant through com- mercial insurance market cycles. Monitor Expenses. Failure to monitor expenses will burden the pool with inaccuracies, out- dated reports, and unreliable data. Strive to keep the loss expense ratio at 30% or less of total contributions (See Table 6). Pool Boards. As a pool matures, it will gain surplus funds. Pool owners may apply pressure to reduce contributions and return the surplus. This is especially true during economic down- turns. An essential purpose of the pool is to lower its members’ total cost of risk. However, before reducing contributions and returning surplus, follow guidance from professional actuaries to avoid creating a deficient position for the pool. The pool needs capital to provide required coverage and make investment decisions to improve the pool’s perfor- mance before returning surplus. Failure to maintain sufficient capital to meet its obligations is why municipal shared-risk pools fail. Pool Management Should Not Be the Sole Gatekeeper of Information about the Pool’s Operation. Audits, actuarial services, pool organization, structure, and staffing evalua- tions should be done by outside contractors to ensure objectivity and maintain credibility. Share information widely among all stakeholders. This can help foster the understand- ing that pool management operates under the board’s authority, not the pool members’ authority. Prioritize Communication between Members. Consider using several communication methods: social media, direct messaging, instant messaging, text messaging, email mar- keting, direct email, blogging, and voice calling. Collaboration and education of all con- cerned with pool operations are essential. Work to build trust. Have a web presence to facilitate the flow of information: bulletins, training, meetings, and agenda minutes. Com- municate openly—monitor pool member satisfaction. Take Advantage of Technology to Increase Efficiency. Traditionally, technology has not played a significant role in setting the tone in the shared-risk pooling culture. However, it now matters tangibly. Pool stakeholders need to see the correlation between the technol- ogy they use and the experience it can provide. If the pool keeps up with developments in technology, it will be in a better position to be more agile and responsive in today’s ever- changing social, economic, and political environment.

Pool Best Practices D-3   Marketing Member Satisfaction Survey Sample Member Satisfaction Survey Rate each on a scale of 1 to 10 (1 being the worst and 10 the best) by circling the number. 1. Underwriting: a. The process represents our organization fairly, 1 2 3 4 5 6 7 8 9 10. b. Exposure base is equitable, 1 2 3 4 5 6 7 8 9 10. c. The confidence level used is (Circle one): OK or Too High or Too Low. 2. Rating for vehicle liability should be based on (Circle one): a. Mileage. b. Vehicle-type. c. Service-type. d. The number of seats. e. The number of loadings. f. Other? 3. Loading Factor is (Circle one): a. OK. b. Too high. c. Too low. 4. Rating for vehicle physical damage should be based on: a. Current replacement cost? b. Actual cash value? 5. Claim Services: a. Reserves, 1 2 3 4 5 6 7 8 9 10. b. Adjusters, 1 2 3 4 5 6 7 8 9 10. c. Initial Contact, 1 2 3 4 5 6 7 8 9 10. d. Investigation, 1 2 3 4 5 6 7 8 9 10. e. Documentation, 1 2 3 4 5 6 7 8 9 10. f. Litigation Management, 1 2 3 4 5 6 7 8 9 10. g. Follow up/Controls, 1 2 3 4 5 6 7 8 9 10. h. Supervision, 1 2 3 4 5 6 7 8 9 10. 6. Administration: a. Issuance of certificate of coverage (COC), 1 2 3 4 5 6 7 8 9 10. b. Issuance of contribution notices, 1 2 3 4 5 6 7 8 9 10. 7. Training: a. Subject Matter, 1 2 3 4 5 6 7 8 9 10. b. Location, 1 2 3 4 5 6 7 8 9 10. 8. Loss Control and Mitigation Programs: a. Program A, 1 2 3 4 5 6 7 8 9 10. b. Program B, 1 2 3 4 5 6 7 8 9 10. c. Program C, 1 2 3 4 5 6 7 8 9 10. d. Etc. 9. Communications: a. Clarity, 1 2 3 4 5 6 7 8 9 10. b. Listening, 1 2 3 4 5 6 7 8 9 10. c. Medium, 1 2 3 4 5 6 7 8 9 10. d. Other, 1 2 3 4 5 6 7 8 9 10. 10. Distribution of surplus/equity: a. The pool keeps too much in reserves? 1 2 3 4 5 6 7 8 9 10. b. Fair and Equitable? 1 2 3 4 5 6 7 8 9 10.

D-4 Shared-Risk Insurance Pools for Transit Agencies: A Guide 11. Risk Information Management System: a. We have had adequate training in its use: 1 2 3 4 5 6 7 8 9 10. b. Helpful in tracking losses and claims, 1 2 3 4 5 6 7 8 9 10. c. Provider/software performance, 1 2 3 4 5 6 7 8 9 10. Procurement Selection Scoring Tools Pool Management Scorecard for __ (fill in name of offeror for Pool Management Contract) ___ Required Services/Capabilities Confidence Score 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Subtotal 1 2 3 4 5 Pricing Fixed Annual Fee (add rows for other pricing criteria) 10 20 30 40 50 10 = Above Budget Goal 20 = Close to Budget Goal Negative Side 30 = At Budget Goal 40 = Close to Budget Goal Positive Side 50 = Below Budget Goal TOTAL SCORE (Sum selections from each row) Fill in the “Services/Capabilities” the board of directors and management have determined to be essential to the pool and assign a score from 1 (low) to 5 (high) that, in your opinion, corresponds to your confidence in that provider’s ability to deliver the needed capability/services. Table D.1. Pool management selection scorecard. Consider using a scorecard or other formal evaluation process for selecting a pool service provider. This will avoid built-in bias and focus the decision process on the needs and priorities of the pool members. A sample service provider scorecard tool is provided in Table D.2 to assist in selecting pool management.

Pool Best Practices D-5   Service Provider Scorecard for _ (fill in name of offeror for service provider contract) _______ Required Services/Capabilities Confidence Score 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Subtotal 1 2 3 4 5 Pricing Fixed Annual Fee (add rows for other pricing criteria) 10 20 30 40 50 10 = Above Budget Goal 20 = Close to Budget Goal Negative Side 30 = At Budget Goal 40 = Close to Budget Goal Positive Side 50 = Below Budget Goal TOTAL SCORE (Sum selections from each row) Fill in the “Services/Capabilities” the board of directors and management have determined to be essential to the pool and assign a score from 1 (low) to 5 (high) that, in your opinion, corresponds to your confidence in that provider’s ability to deliver the needed capability/services. Table D.2. Service provider selection scorecard.

Next: Appendix E - Common Objections to Municipal Shared-Risk Pools »
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Transit agencies are finding it increasingly difficult to find, purchase, and maintain adequate and affordable insurance coverage for public transit vehicles. The number of smaller insurance providers is decreasing due to the volatile nature and demands of the insurance industry and insurance coverage requirements in general.

NCHRP Research Report 1079: Shared-Risk Insurance Pools for Transit Agencies: A Guide, from TRB's National Cooperative Highway Research Program, explains how insurance pools function, how to evaluate the feasibility of a shared-risk insurance pool, and how to establish and manage this type of pool.

Supplemental to report is a presentation and NCHRP Web-Only Document 374: Developing a Guide to Shared-Risk Insurance Pools for Transit Agencies: Conduct of Research Report.

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