July 1, 2020
Is MUSIC planning to provide refunds as some commercial auto liability companies are doing?
By Peggy Wilson, CSS – VP – Member Services and
Alan Schmitt, ARM – VP – Loss Control
The short answer is, because MUSIC is a self-insured pool, any claims savings caused by the pandemic and early closure of schools will be reflected in the 2021 assessment rates.
What is a Self-Insured Pool?
A self-insurance pooling arrangement is a group of organizations, normally homogeneous in nature, banding together to create an association for the purpose of providing risk coverage and related services to its members. The members pay assessments into the association for the purpose of:
- Funding a loss account for paying member claims as they occur
- Procuring excess insurance or reinsurance to protect the pool from large losses
- Hiring a staff – full-time or part-time, one person or multiple individuals
- Engaging a brokerage firm and/or pool administrator depending on internal staffing levels
- Contracting with a third party claims administrator to manage member claims
- Engaging other vendors such as an actuary and auditor
- Paying insurance-related taxes to help fund State agencies
There are many benefits in belonging to a self-insured pooling program, but would like to focus on:
Savings Stay in the Program or Distributed Back to Members – A well-managed pool will accumulate a surplus over time which may be retained in the program to lower future rates or increase self-insured retentions, or may be distributed back to the membership in the form of a dividend. This decision is up to the Board and/or membership with some oversight from state regulators.
MUSIC is able to provide a Membership Credit that is applied to the upcoming renewal assessment which is based on the surplus at the end of the policy term. Dependent upon the monies paid from the loss fund on claims that year helps to determine the percentage that can be given back to its membership.
Due to the COVID-19 pandemic, you may have noticed that some personal auto insurance companies are giving a refund, since you are not using your auto in the capacity it was once used prior to the pandemic. This was done since the insurance carriers risks were lowered – less of a chance to be involved in an accident, if you are staying in place and working from home.
Even though MUSIC will not be issuing individual checks to its members, if losses are lowered and not paid out of the loss fund, this can create a larger surplus. But please remember, MUSIC provides coverage and pays losses for all lines of coverage. This is not new to MUSIC, as credits have been provided to its members for many years, prior to the pandemic. This is why Risk Control is a high priority to MUSIC. They are able to provide resources to assist in keeping claims down, workers’ compensation training, video aids to employees, webinars, legal workshops, and much more. We want to help the member keep claims to a minimum, so there is a surplus to provide back to the members whose program it belongs.
In addition to providing risk control services to assist districts reduce accidents and injuries, our team can also provide guidelines and best practices as you manage through the COVID pandemic. If you have any questions or would like assistance please contact MUSIC.