How Premiums are Determined
Workers’ Compensation, General Liability and Employment Liability
The Office of the President (UCOP), Office of Risk Services (ORS) allocates costs for UC’s self insured Workers' Compensation and Liability Programs to each campus by using professional actuaries. The actuaries use UCLA’s claim costs/history for three prior fiscal years and FTE/payroll to estimate the program costs for the coming fiscal year, and establish a base rate and accrual for the campus. UCLA has a second professional actuary verify the estimated costs and rates and allocates them to UCLA’s departments based primarily on loss experience and, to a lesser degree, (FTE) of each department. Each department is assessed a rate that is higher or lower than the base rate, depending on whether the costs of claims for the cost center are higher or lower than other departments, and estimated FTE.
Property Insurance
Property insurance costs for UCLA are calculated by UCOP ORS by estimating the costs of self insured losses and purchased insurance policies for the coming fiscal year. This is charged to the campus based on a flat rate which does not vary by department.
Be Smart About Safety
UCOP ORS also collects funding for the Be Smart About Safety (BSAS) program, which funds a variety of campus initiatives designed to prevent losses. Costs for this program are allocated to UCLA departments based on claim costs/history for three prior fiscal years.
UCLA Workers’ Compensation and General Liability Rate Additive
UCLA also maintains a Workers’ Compensation Rate additive program which funds a variety of initiatives on campus designed to mitigate claim costs. This is charged to the campus based on a flat rate which does not vary by department. A similar program exists for General Liability and the funding is used to pay for the program’s administrative expenses.
Miscellaneous Costs
Miscellaneous costs for coverages such as Crime, Aviation, Marine, Fine Art and Indentured property are allocated using a variety of methods, and some are directly recharged by UCOP ORS to the appropriate departments.
Deductibles
For most programs, departments are assessed deductibles for individual claims. Some deductibles are mandated by Office of the President, while others are established at the campus level. The deductible schedule provides further detail of this program. The University of California Office of the President has mandated that the campuses assume responsibility for funding the General Liability Program. This funding is presently accomplished by allocating claims costs to the departments, which are paying premiums based on their claims experience, potential exposures and payroll dollars. The bulk of settlement and judgment costs are paid from the funds collected. In order to reduce claims and establish incentives to reduce claims, departments are required to pay a deductible, which is 20% of any claim settlement or judgment, with a minimum of $500 and a cap of $50,000 dollars for General Liability claims and a $7,500 minimum and a $50,000 cap for Employment Liability claims. This is addressed in former Administrative Vice Chancellor Jack Powazek’s Memorandum dated July 25, 2013.
How to Budget for Premiums and Deductibles
Because of variances in claims experience, premiums for Liability and Workers' Compensation Programs vary from year to year. IRM distributes a Deans and Directors memo which contains premium information for these programs in May or June of each year. For programs such as Auto Property Damage and Deductible Buy-Down, premiums are relatively stable from year to year.
Deductible amounts remain constant, so departments should consider how a deductible or series of deductibles would impact cash reserves if a large loss or series of small losses were to occur. Through Loss Control and Training Programs, OIRM can assist you in performing a risk analysis of your operation to more accurately forecast premiums and deductibles.
Please see the Current Premium and Deductible Schedule, or contact the IRM Risk Financing Manager for further details.
