Fort Smith Board debates auto and property insurance costs, options

A more than $230,000 difference between two bids for the city of Fort Smith’s auto and property insurance did not present an easy choice for members of the Fort Smith Board of Directors who on Tuesday (Feb. 10) reviewed the competing insurance plans.

Travelers Insurance bid was $785,106 and a bid from the Arkansas Municipal League(AML) was $554,269. The insurance would cover an estimated $240 million in city property, with $31.818 million of that being for the city’s fleet of 538 vehicles.

However, the two plans are tough to compare because of wide differences in deductibles, liability limits, replacement cost coverages, underinsured coverage options and other factors. Another issue is that Travelers is the second largest U.S. property and casualty insurance firm, and the AML program is self funded. The city staff on Tuesday did not know the asset depth of the program.

Also, Travelers has in past years provided risk management services as part of its contract with the city. If the city goes with AML, Fort Smith Purchasing Manager Allie Bahsoon said the city would need to hire a risk/safely manager. Bahsoon, who praised Travelers’ help in past years with risk and compliance issues, said that cost would be $120,000 in the first year and around $95,000 in the second year.

Bahsoon and City Administrator Ray Gosack said a new policy needs to be approved by March 1, putting pressure on the Board to make a decision.

“We don’t get renewal rates from the insurance companies until the 11th hour,” Gosack said in explaining the tight schedule.

The one point on which Board members did appear to agree was the need for the city to hire a risk and safety analysis and compliance director. Director Tracy Pennartz said she was “surprised that a city of our size did not have a person like that. Director’s Mike Lorenz and Kevin Settle agreed, with Settle saying such a person over time could lower insurance and other costs.

As to the insurance question at hand, Director Keith Lau said he had concerns that the AML plan would not provide the overall coverage the city needs. Bahsoon, who said he was neutral on the issue but favored Travelers in his comments, used the 2008 hail storm to note one key difference in the two policies. The 2008 storm caused $2.5 million in damage to the city fleet, which was covered by Travelers. However, if the city was on the AML plan, $650,000 of the $2.5 million would not have been covered because of fleet depreciation.

“It’s important to take that into account,” Bahsoon said to the Board.

Earlier, Bahsoon said the AML plan provides less “cushion” for the city.

But Pennartz said there are “pluses and minuses on both sides,” adding later in the discussion that the Board needed more information.

“It’s not an easy decision,” she said.

With the discussion continuing more than 45 minutes, Mayor Sandy Sanders asked Scott Clark, with Brown Hiller Clark (BHC), if Travelers would give the city another 30 days to decide. BHC has been the city’s insurance agent for the previous 24 years. Clark, who attended the meeting, said he could get an answer from Travelers by week’s end. If Travelers will grant an extension, the Board will have time to receive more detailed presentations from Travelers and AML. AML did not have a representative at the meeting.

Sanders also called for a straw poll of the Board as to how they would vote. Directors George Catsavis, André Good, Don Hutchings and Lau said they would go with Travelers, while Pennartz and Settle went with AML. Lorenz said he needed more information.

Link here for more detail on the insurance plan comparisons.