Arkansas firm recommends plan for controlling schools’ increasing insurance rates • Arkansas Advocate

A consulting firm recommended to lawmakers Thursday that Arkansas start its own insurance company to deal with rising property insurance premiums for public schools and institutions of higher education.

Meaders, Adams & Lee Insurance Inc. presented by its recommendations For Arkansas Legislative Council executive subcommittee after a months long study Of the issue.

Arkansas legislators choose school insurance premium advisor

Roberts Lee, president of a Little Rock-based consulting firm, said Arkansas should combine the state's three insurance programs into a special-purpose captive, which would give the state more ability to control premiums than buying insurance from another company. gives. (A form of captive insurance where the insured party also owns the entity providing the insurance.)

“Let me tell you the most expensive thing about insurance: it has to be paid to an insurance company,” Lee said. “There's nothing more expensive than this and it's not less expensive than this, and the only way to fix this is to start over.”

Lee said the insurance company should charge schools enough premiums to cover annual expected losses and reinsurance costs, creating a policyholder surplus that can be invested and used to pay claims.

Representative Jack Ladyman, a Jonesboro Republican, agreed it was the smartest approach to insurance, but said there is often a problem with expertise in operating a self-insured program.

To eliminate conflicts of interest and add checks and balances, Lee suggested that the insurance company be governed by a board that reports to the Arkansas Insurance Commissioner.

The board, which will include members such as reinsurance brokers, risk managers and investment advisors, will manage every function of the insurance company, including risk finance and risk control, he said.

Lee also advised to start operations by October 1.

“I commend you for the work you've done, it's one of the most common sense things and businesslike approaches I've seen since I've been in the legislature,” said Rep. Howard Beatty, R-Crossett.

Lawmakers took no action on the report and continued to debate Lee's recommendations, which also included charging a flat rate for all districts. Lee said the move would benefit smaller schools, with the company's research finding they were paying far more than larger schools.

School insurance premiums are rising across the country, education week reportBecause climate change is causing more frequent natural disasters that affect school operations and require insurance companies to pay out.

A tornado that destroyed Wynne High School last March The insurance program managed by the Arkansas School Boards Association lost $122 million of the more than $147 million in losses. This is the largest loss of any school district in Arkansas history, Lawmakers learned that last year.

Last summer, the Governor's Office estimated that Arkansas school districts would see an average 130% increase in insurance premiums this school year. Governor Sarah Huckabee Sanders In July Authorized the use of state funds to cover 30% of cost increases.

MPs allowed The $10.8 million transfer of funds will be divided three ways — $6.3 million to the 170 districts in the program managed by the Arkansas School Boards Association; $4.46 million for 68 districts in the Arkansas Public School Insurance Trust, which is administered by the Arkansas Department of Insurance; and about $118,000 for the Bentonville School District, which purchases insurance directly through the open market.