Agenda item

Consideration was given to a report of the Director of Finance which provided an overview of the recent tendering exercise for the Council, Unity Partnership and Miocare’s ongoing liability insurance. Following the end of the long-term agreement for current insurances, a tender exercise was carried out for insurance and it is necessary to consider the insurance position going forward for the next five years.

The insurances for the Council, Miocare and Unity Partnership were currently tendered in two parts:

·                     Liability insurance which covered the Council’s legal liabilities including employers and public liability insurance. Examples of these are highway tripping claims and employee accidents.   These policies were appointed via a tender process in July 2016, these policy long term agreements expire on the 31 March 2021.

·                     Property insurance which provides cover for the Council’s assets for fire, lightning, explosion, aircraft, riot, storm and flood, and motor insurance. These policies were last tendered in 2019 and are subject to a Long Term Agreement with insurers until March 2024.

The insurance market for Local Authorities traditionally had been dominated by three providers.  Two new insurance providers entered the public sector market over the past few years.  A further insurer remains an interested party for property and liability risks but currently has very limited public sector clients.

 The first quarter of 2020 saw the tenth consecutive quarter of price increases across the insurance market. The major price increases were around property, financial and professional lines, with the largest being in the Directors’ and Officers’ rates.  Covid-19 has meant changes to prices, cover and risks across the public sector.

Insurers were facing a double hit from coronavirus. Claims were increasing and there had also been a hit to reserves from volatile financial markets.  The Financial Conduct Authority (FCA) brought a case against eight insurers in June 2020 to clarify whether 21 policy wordings, affecting potentially 700 types of policies, 60 insurers, 370,000 policyholders and billions in insurance claims, covered disruption and Government-ordered closures to curb the virus.  The decision which was largely in the policy holders favour, had been appealed and the judgement was received in January, again in the policyholders’ favour.  This decision affected insurance pricing.

There had been blanket exclusions put in place by insurers in relation to pandemic cover, with the adult care sector being one of the worst impacted.  Some areas are having insurance premiums quadrupled and exclusions put in place in relation to coronavirus/pandemic cover. 

In relation to risk exposure for insurers, existing insurance policies never anticipated that organisations would find themselves having to transform their operations to such an extent, and, as a result, have not respond as expected. An example of this is the redeployment of staff, where many employees who would normally be desk-based were stepping up to help operational roles.  The risks associated with an employee working in an office are markedly different to those of someone providing support for lateral flow tests or marshalling immunisation centres.

For this tender the Council used the Yorkshire Purchasing Organisation Insurance Services Dynamic Purchasing System which allowed the Council flexibility, legality, access to pre-qualified suppliers, and the benefits of aggregation of spend.  The tender was carried out with the assistance of Gallagher’s, the Council’s brokers, and the Council Procurement Team.

There was now far more scrutiny of individual exposures and insurers were being more selective and discriminate more against poor risks.  The Council conducted the tender under the framework agreement and invited all insurers on the framework to tender. The criteria are weighted 50% on service standards and cover and 50% on price.

Four suppliers on the framework confirmed that they were able to meet the criteria listed in the tender documentation and submitted proposals to the Council.

An analysis of pricing and quality was carried out by an evaluation team made up of the Insurance Team, Procurement Section and Gallagher’s.  Quotes were obtained on the basis of a three-year deal with an option to extend for a further two years, and a straight five year long term agreement.  Most insurers provided prices on a five-year long term.  Four insurers quoted. 

Details in relation to the bidders are provided in the private version of the report due to reasons of commercial confidentiality.  However, the evaluation scores for two bidders (A) and (B) were higher and therefore subject to detailed consideration.

Options/Alternatives

Option 1 - To award the contract to Bidder A

Option 2 - To award the contract to Bidder B.

Option 3 - To not award the contract. This option would leave the Council with no formal insurance in place.  The Council would then need to self-insure all areas of insurance going forward from Council funds.

RESOLVED – That the Cabinet would consider the commercially sensitive information detailed at Item 16 of the agenda before making a decision.