In search of savings, Buffalo Grove leaving insurance group it founded
With Village President Beverly Sussman casting the tiebreaking vote, Buffalo Grove formally severed ties Monday with the Intergovernmental Risk Management Agency, a municipal insurance collective it helped found in the 1970s.
Now the village will be working with broker Arthur J. Gallagher & Co. to obtain liability coverage, including for workman's compensation.
Sussman said leaving IRMA was hard decision, especially after Margo Ely, the agency's executive director, pleaded the case of the intergovernmental risk consortium.
But ultimately, village staff's position that the move would save Buffalo Grove as much as $600,000 over five years won over the village board.
Finance Director Scott Anderson argued that Buffalo Grove was being penalized by IRMA's method of basing premium amounts on village revenues.
“Revenue as a proxy for risk really isn't appropriate based on what we have been doing in the village,” he said.
The village was facing an average annual premium increase of about $115,000 over the next five years under IRMA, Anderson added. Even after IRMA provided an alternative pricing formula, it was still about 5.6 percent higher than Gallagher, he said.
Buffalo Grove was one of the first members of IRMA, a pool of about 70 local municipalities and special service districts that jointly manage and fund their property, casualty and workers' compensation claims.
Ely told village leaders there would be several advantages to remaining a member, including the ability to move to higher deductibles and earn interest on member reserves.
“You have the security and safety of pooling with other government entities in a not-for-profit structure that is open and transparent with respect to what your premium and contribution is,” she added. “The insurance company is not going to tell you how they're pricing.”
Village Manager Dane Bragg said the premium calculation is not the only issue the village had with IRMA. The village also wanted more control over the design of its insurance plan, something they expect to get in the private market.