Insurance Cost To Increase By 22% For Highland Park In 2021

HIGHLAND PARK, IL — Highland Park's municipal insurance costs will increase by about 22 percent next year, but the increase would be even greater had the city not joined a liability pool with other three other suburban communities last year.

The city's insurance premiums and administrative costs are estimated to rise by $131,000 in 2021 to more than $730,000, according to a package approved unanimously Monday by the City Council.

Highland Park joined Buffalo Grove, Elk Grove Village and Hoffman Estates in forming the Suburban Liability Insurance Pool, or SLIP, which took effect in 2019. The pooled plan gives municipalities broader coverage, lower fixed costs and the ability to retain underwriting profits that would otherwise go to insurance carriers, according to Finance Director Julie Logan.

Logan said it has become much harder for public entities to find willing insurance providers. This year, 34 of the 47 carriers approached by the pool refused to even quote a price, she said.

"There is a rapidly increasing industry loss trend in liability lines," Logan said. "So if you boil that down, the underwriters have a much higher need to make profit from underwriting versus investment income and it puts them in a little bit of an advantage in what they're offering"

SLIP's insurance broker, Rolling Meadows-based Arthur J. Gallagher & Co., reported that a substantial increase in the number of major weather events, historic low interest rates and rapidly increasing losses have all contributed to underwriters hiking premiums to boost revenue.

"The casualty marketplace is seeing the effects of social inflation, which is increased costs from rising litigation resulting in larger jury verdicts," according to a summary of the A.J. Gallagher proposal.

"For our municipalities that means carriers are seeing more suits involving excessive force under law enforcement and civil unrest; large auto liability claims; large public officials’ claims involving alleged sexual harassment; and employment practice claims," it continued. "Concerned with the litigation environment being favorable to plaintiffs, carriers are pushing rate increases, limit reductions, and coverage exclusions. They are very cautious within certain counties, including Cook and Lake County."

According to Gallagher, the average rate increase for an account with no claims is 22 to 25 percent. Those with losses or in specific locations have seen rate increases of 40 to 50 percent. The broker reported that similarly sized municipalities in Northern Illinois have seen overall premium increases ranging from 25 percent to 75 percent.

Logan said multinational insurance providers are also pricing in an increased risk of insurance claims stemming from misconduct by police, property damage during protests or widespread looting and rioting.

"Not that we have significantly had that here in Highland Park — it is what is going on across the United States and the global carriers' view of what is going on in the United States," Logan said ahead of the vote on the proposal at Monday's City Council meeting.

"Suburbs like Naperville have been asked, during their insurance proceedings, if they're going to have civil unrest and if they're having rioting in the streets. That's how far it's gone," she said. "Many carriers are very newly, this year, unwilling to quote insurance to the public entity market at all."

In response to the COVID-19 pandemic, insurance carriers have begun to introduce an increasing number of communicable disease exclusions into their policies. Cyber liability claims have also been on the rise, according to Gallagher up by more than 100 percent during the pandemic as more people work remotely and over less secure networks.

But Highland Park's cyber, identity theft and multimedia liability premiums remained flat for 2021. The bulk of the increased costs comes from the cost of its excess liability insurance — the additional umbrella coverage that picks up after another policy hits its limit.

The SLIP pool needed two separate providers to cover its excess liability, resulting in more than $100,000 of the overall increase, according to a summaryof the new rates.

Logan said some communities have responded to the rate hikes by cutting back on coverage, but the board of the suburban pool decided to go for the same coverage at a higher cost.

"Given the pandemic that is currently going on and the uncertainties that could potentially result from the pandemic, we didn't think this was the right time to be proposing liability coverage decreases," Logan said. "So therefore we are resulting in this overall 22 percent increase year-on-year."