reserve to cover the possibility of multiple large claim hits in one year, they would rather put that
money to work in their business.
WBS has managed the City of Nashua stop loss program for six years. In those six years the City has run
a 72% loss ratio; about 7 to 12 percent higher than industry targets. {Loss ratio is the comparison of
claims paid by the insurer to premiums received by the insurer.) The City has run very favorably over
the last four years (F¥13-FY16) with about a 50% loss ratio. Prior to that the loss ratio in FY 11 was 172%
and FY 12 was 107%. Asa testament to the unpredictability of claims, a $600,000+ claim just
materialized within the last two weeks.
The bottom-line is that WBS does not recommend eliminating stop loss insurance because you have
paid in more than you have received in reimbursements. That is a basic tenant of insurance. We do not
purchase stop loss to beat the insurance company, we purchase it to mitigate risk and smooth out our
experience for budgeting.
If the City’s desire is to reduce expenses by taking on additional risk | would recommend increasing the
specific deductible to $350,000. That will reduce the premium by about 25% on top of the negotiated
15% reduction we have on the table for the current $250,000 ISL. Given the healthy claim reserve fund
the City has accumulated in the last 5 years | think the additional risk is reasonable.
Sincerely,
Thomas G. DeLacey~
Principal Consultant
Workplace Benefit Solutions
a HUB International Company
