Orangeville Council split on insurance coverage

Orangeville Council's meeting Monday was a smooth operation, overall, with motions being forwarded and seconded, and municipal business disposed of in a clockwork manner - until the subject of the town's insurance coverage came up.

Orangeville's insurance coverage expires Oct. 31, and council is considering two avenues. One is to remain with Frank Cowan Company Ltd., which has been the town's insurer for almost 20 years. The other is to go with OMEX (Ontario Municipal Insurance Exchange), a reciprocal exchange.

A reciprocal insurance exchange is an unincorporated group of organizations that contract with each other to spread the risks and losses inherent in their perspective activities.

Should one member of the group suffer a loss, the others help cover the loss based on a pre-arranged formula.

The group currently has 33 members, including Windsor, Thunder Bay, Sarnia, Owen Sound and Milton, among others.

The main advantage of OMEX is the substantially cheaper premiums. Its quote was $179,000 cheaper than Frank Cowan's.

As well, a chart prepared by Town Treasurer Wayne Church showed an exponential growth in Orangeville's insurance premiums from $158,297 in 2001-02, to $420,463 in 2006-07.

Councilor Scott Wilson expressed his discomfort with the OMEX idea. "These arrangements have long tails," said Mr. Wilson.

"Any municipality I've been involved with has never gone the reciprocal route. There are too many unknowns."

Councillor Gail Campbell, who suggested Orangeville "stay with Cowan," shared Mr. Wilson's concerns, suggesting the firm "is a known entity."

In a written report to council, Mr. Church mentioned that Frank Cowan Ltd. has an established history in the field of municipal insurance and, along with Orangeville Insurance Services, has provided "excellent service and business relationships with the Town of Orangeville spanning almost 20 years."

Councilor Sylvia Bradley, however, spoke in favor of the town going with OMEX.

"There is a significant dollar difference in the premiums," she noted, "and the money we save could be put into reserves, where we could build up a substantial nest egg."

Mr. Wilson countered that paying the OMEX premium and banking the savings would not translate into savings for the taxpayer.

Dufferin County, meanwhile, has been with the OMEX reciprocal for five years and, in 2006, the county paid out an unexpected $106, 033 as a result of the cost-sharing formula.

While the cost was not anticipated, Dufferin County has stated that the expense has been more than offset by premium savings over the five-year period.

As with any cost-sharing enterprise, there is a major concern about sharp cost increases for members should a large member of the group withdraw from the agreement.

OMEX prefers that members lock in to the agreement for three to five years for the sake of stability.

"This preferred longer term commitment to OMEX is one with which the town would need to comply," Mr. Church wrote in his report, "although there is a sixmonth termination clause in the proposed contract."

There is also the prospect of a member taking advantage of the agreement when it is hit with a large claim, and then cutting loose from OMEX.

"It must be remembered that, even if a member leaves the group, it is forever liable for assessments that relate to its period of membership," says Mr. Church's report.

While the Frank Cowan quote is substantially higher, it has advantages because of its relative simplicity. The annual premium provides the required insurance coverage and that premium is fixed, with no chance of future assessment against the town.

The decision on which insurance carrier to go with remains before council.