Barton Community College’s insurance deductible for wind and hail damage will jump to $2.5 million unless another company offers a better deal by Tuesday. For all other property damage, the deductible is still $25,000.
College trustees approved the property and liability insurance policy renewals this week but gave Vice President of Administration Mark Dean the authority to pay a different company if he can find a better deal. However, the current policy ends on June 30 and a new policy must be in place on July 1.
“This has been a challenging year for insurance,” Dean told college trustees when they met Tuesday.
Barton, like most Kansas community colleges, is in an insurance consortium known as MHEC. This enables them to share in the benefit of being in a large pool with other colleges throughout the nation. But claims from Kansas, Nebraska and Oklahoma have exceeded the total revenue generated by all participating states in the consortium. Kansas accounts for 53% of the losses while having only 16% of the insured value within the consortium, Dean said.
Dean outlined the college’s options. Last year, when offered a $300,000 wind-hail deductible, the college spent $37,000 to bring that back down to $25,000. This year it would cost $241,675 to buy down the wind/hail deductible to $100,000. Buying down the deductible to $1 million would still add $120,000 to the premium.
The college’s property was insured at $123 million last year and will be insured at $129-130 million this year.
“My recommendation is not to pay any of the buyback,” Dean said. The biggest risk of leaving the deductible at $2.5 million would come if a tornado hit the college. That hasn’t happened in its 50-year history, Dean said. But as last Sunday’s storm in Great Bend shows, wind and hail can do a lot of damage even without a tornado.
“Six or seven years ago there was a $600,000 event with large hail,” Dean said, recalling the damage to the college in that storm. “If we look at history and the number of hail events (compared to the cost of the buy-down), it wouldn’t take that long to make that money back up.
“The decision is yours if we take that risk,” he told the trustees.
The cost for next year’s premiums comes to $379,994, compared to $345,449 for 2019-2020. This is for property, casualty, workers compensations and other insurance. The property insurance went from $89,209 plus the $37,125 wind/hail deductible buyback from Lloyd’s of London, to $173,676. But the college saw decreases in the cost of cyber liability and the auto insurance dropped from $54,371 to $39,553.
Other options
Board Chairman Mike Johnson asked if the college could see what others are doing that are not with MHEC. “We’re so late in the game now (we probably) can’t get another company to quote,” he said.
Dean said he reached out to other companies but no one else was interested in insuring Kansas community colleges until recently.
“This last week, insurance companies saw what MHEC was doing and they want to provide quotes to us,” he said. But as of Tuesday, he had not received any quotes that were comparable for a lower cost.
Costly Kansas
Other Kansas schools are also affected by the rising number of claims in the consortium. One Kansas community college, which Dean declined to name, was non-renewed by the consortium and is expecting a $1 million increase in the cost of insurance coverage. Another Kansas community college will see a $500,000 increase in its premium this year, Dean said.
Fifty K-12 schools in Kansas were non-renewed by their insurance carrier in the past six months, he added.
Wind and hail are the big concerns now, but they aren’t the only challenges this year.
“On a global basis, the COVID-19 pandemic is shaping up to be the largest single loss event in the history of insurance,” Dean reported. However, it had little effect on the property insurance.
