Risk Management Department
Annual Report
For the Fiscal Year Ending June 30, 2003
The School Board of Broward County, Florida
Sunrise, Florida
2002/2003 Risk Management Annual Report
Executive Summary
Risk Management is generally defined as the identification, measurement and treatment
of exposures to potential losses; and subsequent management of actual losses in an
effort to minimize an organization鈥檚 cost of risk.
It is the mission of the Risk Management Department to provide risk prevention and
mitigation services to The School Board of Broward County, Florida, aimed at reducing
the district鈥檚 overall property/casualty losses, in a manner which supports the district鈥檚
Strategic Mission and Objectives. Additionally, the Risk Management Department
strives to continuously improve our delivery of such services. To accomplish this
mission, the Risk Management Department administers five key processes/programs
along with its general administration activities. These processes include: the
procurement of the district鈥檚 excess property/casualty insurances, the management of
the district鈥檚 third party liability and Workers鈥? Compensation claims, the
Occupational/Environmental Program, the Employee Health Testing Program, and
oversight of the district鈥檚 24 hour security and alarm systems.
Although there are numerous benchmarks utilized in the risk management industry,
the primary indicator the Risk Management Department utilizes to evaluate overall
annual effectiveness is the 鈥淐ost of Risk鈥?. The cost of risk concept accounts for the total
costs associated with an organization鈥檚 risk management functions, and reports the cost
of risk as a percentage of revenues, employees, or other indicator associated with the
size of an organization. The Risk Management Department has chosen to report the
Cost of Risk in association with student enrollment. The cost of risk per student data
provides an overview of the effectiveness of the risk management function, while
providing consideration for the district鈥檚 growth. The graph below reflects the district鈥檚
cost of risk per student over the last three fiscal years. As the cost of risk data becomes
more readily utilized as a risk management evaluative tool, it will be important to
further analyze the comparative data to ensure standardization of reporting.
Cost of Risk per Student
$181.26
$182.00
$179.27
$181.00
$180.00
$179.00 $177.34
$178.00 Cost of Risk per Student
$177.00
$176.00
$175.00
FY 2000/2001 FY 2001/2002 FY 2002/2003
Fiscal Year
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2002/2003 Risk Management Annual Report
Executive Summary (continued)
The district鈥檚 total cost of risk for fiscal year 2002/2003 was $47,212,636.10. This figure
encompasses the year-end total expenditures for all of the Risk Management
Department鈥檚 functions. The illustrations below outline the total cost of risk by
program.
FY 2002/2003
Program Expenditures
Property/Casualty Insurance $ 16,031,106.20
Claims Management $ 30,051,888.21
Occupational/Environmental $ 293,479.70
Security $ 277,983.00
Employee Health Testing $ 100,160.00
General Administration $ 458,018.99
Total Cost of Risk $ 47,212,636.10
Cost of Risk by Program
Fiscal Year 2002/2003
Employee Health
Testing General
0.21% Administration
0.97%
Security Property/Casualty
0.59% Insurance
33.96%
Property/Casualty Insurance
Occupational/Environmental
Claims Management
Security
Employee Health Testing
General Administration
Claims
Occupational/
Management
Environmental
63.65%
1%
This annual report is intended to provide an overview of the activities associated with
the Risk Management Department. The report is organized to first highlight the major
accomplishments which occurred during the fiscal year and then to provide statistical
data associated with the key functions of the department.
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2002/2003 Risk Management Annual Report
Reduction in District鈥檚 Self-Insured Loss Fund
The district maintains financial reserves in its self-insured loss fund to finance the
district鈥檚 self-insured property/casualty losses, including claims, which are incurred
but not received (IBNR). As of June 30, 2003, there was a $2.3 million reduction to the
loss fund. This reduction was primarily the result of favorable development of losses
for accident years 2002 and prior. The $2.3 million may now be unencumbered from the
loss fund and reallocated for other purposes. The chart outlined below provides an
illustration of the loss reserves for the last four years.
Self-Insured Reserves
Four-Year Comparison
$110,000,000
$105,158,000
$102,843,000
$105,000,000
$96,466,000
$100,000,000
$92,532,000
$95,000,000
$90,000,000
$85,000,000
As of June 30, As of June 30, As of June 30, As of June 30,
2000 2001 2002 2003
Reduction in District鈥檚 Indemnity Payments
Indemnity benefits are paid to employees injured on the job for their missed time from
work at the rate of 66 and 2/3 of their salary. In fiscal year 2002/2003, the Risk
Management Department, in conjunction with its third-party administrator (TPA) and
managed care partners, implemented strategies aimed at reducing these losses. As of
June 30, 2003, there was a $3.9 million reduction in indemnity payments for the fiscal
year. Outlined below is a chart identifying indemnity losses over the last four years.
Indemnity Payments
Four-Year Comparison
$14,000,000
$11,609,515
$12,000,000
$10,000,000 $7,621,452 $7,632,729
$7,118,865
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
Fiscal Year 99-00 Fiscal Year 00-01 Fiscal Year 01-02 Fiscal Year 02-03
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2002/2003 Risk Management Annual Report
Reduction in Average Payments for Physical/Occupational Therapy
The district utilizes a third-party provider to deliver Physical and Occupational
Therapy services to employees injured on the job. In an effort to reduce costs associated
with these therapy payments, Risk Management created a competitive service arena by
implementing a second Physical and Occupational Therapy provider. Additionally, an
alternate 鈥渇lat rate鈥? payment method was piloted. Outlined below is a chart identifying
Physical and Occupational Therapy payments for the last four years.
Physical/Occupational Therapy Payments
Four-Year Comparison
$1,600,000 $1,369,468
$1,235,416
$1,177,194
$1,400,000
$1,200,000
$731,975
$1,000,000
$800,000
$600,000
$400,000
$200,000
$-
Fiscal Year 99-00 Fiscal Year 00-01 Fiscal Year 01-02 Fiscal Year 02-03
Fiscal Year 2002/2003 marked an increase in the number of claims requiring Physical
and Occupational Therapy Services. Despite the additional utilization of services, Risk
Management was able to reduce total expenditures associated with these services in
comparison to last year. The chart below reflects this was accomplished by reducing
the average expenses associated with each claim.
Physical/Occupational Therapy Average
Expense per Claim
1,800
1,600
1,711
1,400
1,326
1,200
$1,032.78
1,000
PT/OT Claims
$722.04
800
600 Average Expense
per Claim
400
200
0
FY 2001/2002 FY 2002/2003
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2002/2003 Risk Management Annual Report
The Risk Management Department and its Role
The district is exposed to a variety of accidental losses and has established a risk
management strategy that attempts to manage and minimize the cost of risk. Risk
control techniques have been established to reasonably assure district employees are
aware of their responsibilities regarding loss exposures related to their duties. In
addition, these techniques have been established to reduce possible losses to property
owned or under the control of the district. The following processes/programs provide
specific details of each area.
Property/Casualty Insurance Program
Property/Casualty Insurance Program
Customer Environmental Scan
Facilities and Purchasing
The Property/Casualty Insurance Program is School Board
Department
the first of five key functions within the Risk Does Risk Management provide Are requests to confirm
Management Department. This function adequate self-insurance and insurance compliance for
excess insurance to protect the vendors and contractors
consists of the procurement of the district鈥檚
district's assets from handled in a timely
excess property/casualty insurance policies, catastrophic loss? Is the excess manner? Is staff readily
insurance verification for vendors and insurance program cost effective available to provide
in comparison to other large assistance with regard to
contractors, and contractual review of
governmental entities in South insurance issues?
insurance and indemnification provisions for Florida?
the various contracts and agreements entered
Schools Employees
into by the School Board. In an effort to
assure the department is providing quality Is there adequate coverage to Is there adequate coverage
customer service, Risk Management has remedy school-based losses? Is to remedy workplace
staff readily available to provide injuries and vehicle
conducted an environmental scan of its
assistance with regard to damage reimbursement? Is
primary and secondary customers. The insurance issues? staff readily available to
illustration to the right lists questions that provide assistance with
regard to insurance issues?
will be utilized to develop the key indicators
the department will use in the future to
determine customer satisfaction.
Currently, the primary indicators for this program relate to the cost of procurement for
the district鈥檚 excess property/casualty program. The district purchases several lines of
excess insurance to protect its assets and operations. These include general liability,
automobile liability, property, Workers鈥? Compensation, and catastrophic accident &
disability. The district procures these lines of coverage to supplement its self-insurance
program. The Self-Insurance Internal Service Fund finances the district鈥檚
property/casualty losses up to an established retention. (The Self-Insured Internal Service
Fund reserves as of June 30, 2003 are illustrated in the graph on page 2 of this report.) Once
the Self-Insured Retention (SIR) has been exceeded, the additional loss expenses are
reimbursed to the district by the excess insurer.
The exhibits on the following page trend the total insurance premium costs associated
with the district鈥檚 excess insurance program since the 1999/2000 fiscal year.
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2002/2003 Risk Management Annual Report
Property/Casualty Insurance Premiums
$16,000,000.00
$13,495,260.00
$14,000,000.00
$12,000,000.00
$8,750,147.00
$10,000,000.00
$6,747,698.00
$8,000,000.00 $5,611,243.00
$6,000,000.00
$4,000,000.00
$2,000,000.00
$-
Fiscal Year 1999/2000 Fiscal Year 2000/2001 Fiscal Year 2001/2002 Fiscal Year 2002/2003
The excess insurance program experienced a significant increase in costs in 2002/2003.
This increase was a direct result of a hardening market exacerbated by the tragic events
of September 11, 2001. The 2002/2003 renewal was the first subsequent to the worst
terrorism attack in United States history. The chart below clearly reflects the two lines
of coverage having the most dramatic affect to the overall program were the excess
property and Workers鈥? Compensation.
Excess Property Casualty Insurance Program
Percentage
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Increase/
Line of Coverage (Decrease)
1999/2000 2000/2001 2001/2002 2002/2003
Excess Property $ 4,436,756.00 $5,466,350.00 $ 7,293,004.00 $11,160,000.00 53%
Governmental
$ 857,500.00 $ 939,000.00 $ 1,029,000.00 $ 1,335,000.00 30%
Package
Workers'
$ 182,663.00 $ 203,326.00 $ 286,762.00 $ 823,129.00 187%
Compensation
Cat Accident &
$ 36,400.00 $ 36,400.00 $ 36,400.00 $ 65,140.00 79%
Disability
Boiler & Machinery $ 28,109.00 $ 30,498.00 $ 40,289.00 $ 46,332.00 15%
Crime & Dishonesty $ 40,548.00 $ 40,548.00 $ 36,576.00 $ 36,576.00 0%
Health Occupational $ 23,760.00 $ 23,760.00 $ 23,760.00 $ 24,000.00 1%
Storage Tank Liability $ 4,327.00 $ 5,466.00 $ 3,386.00 $ 2,064.00 -39%
Accidental Death $ 350.00 $ 350.00 $ 350.00 $ 699.00 100%
Fidelity Bonds $ 415.00 $ 1,000.00 $ 310.00 $ 1,160.00 274%
54%
Totals $5,610,828.00 $6,746,698.00 $8,749,837.00 $13,494,100.00
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2002/2003 Risk Management Annual Report
Claims Management Program
The Risk Management Department鈥檚 second key process is the Claims Management
Program. This program entails the management of the district鈥檚 third-party liability
and Workers鈥? Compensation claims. The Risk Management Department employs a
Third Party Administrator (TPA), Gallagher Bassett Services, to assist with the
implementation of this program. Services provided by the TPA include claims
investigation, establishing loss reserves, claims adjusting, and claims payment
processing. The Risk Management Department also utilizes an internal lost and stolen
process for the replacement of lost and stolen equipment.
Total Claims by Line
Fiscal Year 2002/2003
909 Property
Workers' Compensation
328 Medical
Workers' Compensation
Indemnity
General Liability
192
Auto Liability
2,598 140
Auto Physical Damage
12
Total Claims Expense by Line
Fiscal Year 2002/2003
Property
$11,106,832.0
Workers' Compensation
Medical
Workers' Compensation
Indemnity
General Liability
$2,290,968.0
Auto Liability
$640,577.0 Auto Physical Damage
$531,468.0
$81,000.0
$16,184.0
The following pages provide historical loss data based on the line of coverage.
Although the district鈥檚 policy periods correlate to the district鈥檚 fiscal year (July 1st 鈥? June
30th), it is important to note all claims data is tracked and analyzed by claim/policy
period. This is most relevant in reviewing the total claims expense data. The losses
recorded represent the total expenses incurred for claims filed during a particular
policy period, regardless of the fiscal year these expenses were actually incurred.
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2002/2003 Risk Management Annual Report
GENERAL LIABILITY CLAIMS
The illustrations below outline the number of general liability claims filed and the
resulting expenses incurred over the last four fiscal years.
General Liability Claims by Policy Period
600
397
500 380
368
328
400
300
200
100
0
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
General Liability Claim Expenses by Policy Period
$3,335,266.00
$2,982,219.00
$3,500,000.00
$3,000,000.00 $2,290,968.00
$2,500,000.00 $1,836,042.00
$2,000,000.00
$1,500,000.00
$1,000,000.00
$500,000.00
$-
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
Please remember, the claim expense information reported above is based on the policy
period the claim was filed. This information does not represent the fiscal year
expenditures associated with general liability claims.
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2002/2003 Risk Management Annual Report
AUTOMOBILE LIABILITY CLAIMS
The illustrations below outline the number of automobile liability claims filed and the
resulting expenses incurred over the last four fiscal years.
Automobile Liability Claims by Policy Period
350
300
230
202 195 192
250
200
150
100
50
0
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
Automobile Liability Claim Expenses by Policy Period
$1,000,000.00
$772,110.00
$782,054.00
$900,000.00
$661,658.00
$800,000.00
$531,468.00
$700,000.00
$600,000.00
$500,000.00
$400,000.00
$300,000.00
$200,000.00
$100,000.00
$-
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
Please remember, the claim expense information reported above is based on the policy
period the claim was filed. This information does not represent the fiscal year
expenditures associated with automobile liability claims.
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2002/2003 Risk Management Annual Report
AUTOMOBILE PHYSICAL DAMAGE CLAIMS
The illustrations below outline the number of automobile physical damage claims filed
and the resulting expenses incurred over the last four fiscal years.
Automobile Physical Damage Claims by Policy Period
200
157 157
152
180
140
160
140
120
100
80
60
40
20
0
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
Automobile Physical Damage Claim Expenses by Policy Period
$16,184.00
$16,000.00
$14,000.00
$10,222.00
$12,000.00
$10,000.00
$8,000.00
$6,000.00
$4,000.00 $1,114.00
$85.00
$2,000.00
$-
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
Please remember, the claim expense information reported above is based on the policy
period the claim was filed. This information does not represent the fiscal year
expenditures associated with automobile physical damage claims.
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2002/2003 Risk Management Annual Report
PROPERTY CLAIMS
The illustrations below outline the number of property claims filed and the resulting
expenses incurred over the last four fiscal years.
Property Claims by Policy Period
20
16
18
16
12
14
10
12
7
10
8
6
4
2
0
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
Property Claim Expenses by Policy Period
$338,040.00
$350,000.00
$300,000.00
$250,000.00
$200,000.00
$150,000.00
$81,000.00
$100,000.00
$1.00
$1,397.00
$50,000.00
$-
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
Please remember, the claim expense information reported above is based on the policy
period the claim was filed. This information does not represent the fiscal year
expenditures associated with property claims.
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2002/2003 Risk Management Annual Report
WORKERS鈥? COMPENSATION (MEDICAL ONLY) CLAIMS
The illustrations below outline the number of Workers鈥? Compensation medical only
claims filed and the resulting expenses incurred over the last four fiscal years.
Workers' Compensation (Med Only) Claims by Policy Period
2,598
3,000
2,500
1,918
2,000
1,244
1,222
1,500
1,000
500
0
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
Workers' Compensation (Med Only) Claim Expenses
by Policy Period
$640,577.00
$700,000.00
$491,443.00
$471,479.00
$600,000.00
$449,503.00
$500,000.00
$400,000.00
$300,000.00
$200,000.00
$100,000.00
$-
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
Please remember, the claim expense information reported above is based on the policy
period the claim was filed. This information does not represent the fiscal year
expenditures associated with Workers鈥? Compensation medical only claims.
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2002/2003 Risk Management Annual Report
WORKERS鈥? COMPENSATION INDEMNITY CLAIMS
The illustrations below outline the number of Workers鈥? Compensation indemnity
claims filed and the resulting expenses incurred over the last four fiscal years.
Workers' Compensation Indemnity Claims by Policy Period
1200 983
909
850
1000 807
800
600
400
200
0
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
Workers' Compensation Indemnity Claim Expenses
by Policy Period
$25,000,000.00
$19,752,966.00
$17,759,375.00 $16,955,861.00
$20,000,000.00
$11,106,832.00
$15,000,000.00
$10,000,000.00
$5,000,000.00
$-
Fiscal Year Fiscal year Fiscal Year Fiscal Year
1999/2000 2000/2001 2001/2002 2002/2003
Please remember, the claim expense information reported above is based on the policy
period the claim was filed. This information does not represent the fiscal year
expenditures associated with Workers鈥? Compensation indemnity claims.
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2002/2003 Risk Management Annual Report
Occupational Health and Environmental Program
The Occupational Health and Environmental Program includes
School Board
the medical monitoring and training associated with potential Is the district in compliance with all
employee occupational exposures, participation in the district鈥檚 federal, state and local standards?
Indoor Environmental Quality (IEQ) plan, and the district鈥檚
Schools
chemical control functions.
Are occupational health and
environmental concerns addressed in
Objective 4 of the district鈥檚 strategic plan indicates, 鈥淏y August the appropriate manner?
2004, all students will attend a school that is safe, secure, and
Employees
conducive to student health and well-being.鈥? A major issue Are employees appropriately trained
associated with this objective is the district鈥檚 Indoor regarding occupational health and
Environmental Quality Program. Strategy 4.1 of the plan is to environmental concerns?
implement a process, which includes monitoring and reporting
results, to resolve substandard Indoor Environmental Quality (IEQ) at all locations. In
accordance with the district鈥檚 Short-Term Communication Model to report and assess
complaints relating to IEQ at locations, the Risk Management Department routinely
conducts initial IEQ assessments at many district locations. Beginning in fiscal year
2003/2004, the Risk Management Department will develop a monthly reporting format
to communicate IEQ complaints and resolution action plans to Senior Management.
Other action steps associated with this strategy include the reporting of Workers鈥?
Compensation and General Liability claims attributed to Indoor Environmental Quality.
The graph below outlines the reported claims over the last four-year period.
Indoor Environmental Quality Claims
49
50
45
40
35
30
21
Workers' Compensation Claims
25
General Liability Claims
20
11 11
15
10
2
2
1 0
5
0
1999/2000 2000/2001 2001/2002 2002/2003
It is important to note, the district has not previously utilized a specific indicator to
track Indoor Environmental Quality claims. Accordingly, the data outlined above is the
result of staff reviewing individual claims and identifying those most likely associated
with Indoor Environmental Quality complaints. In the future the data will be
standardized, as a specific tracking mechanism has been developed to identify this
classification of claim.
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2002/2003 Risk Management Annual Report
Employee Health Testing Program
The Employee Testing Program is responsible for implementing the district鈥檚 Drug-Free
Workplace Policy (School Board Policy 2400). The program conducts pre-employment,
reasonable suspicion, post accident, follow-up, and
random testing of all employees required to maintain a
School Board
Is the program being implemented in
Commercial Driver鈥檚 License as a condition of
compliance with federal, state and
employment. Additionally, the program conducts
local standards?
reasonable suspicion testing of all employees in
Schools
accordance with School Board Policy 2400, Rule 5. The
Is the program in compliance with
primary focus of the program is to ensure compliance
School Board Policy 2400?
with federal, state, and local regulations. The Risk
Employees
Management Department contracts with a third-party to
Is the program being implemented in
a confidential manner?
conduct all testing and provide administrative assistance
with the program.
The Employee Health Testing Program works closely with the Professional Standards
Department to assist in the district鈥檚 reasonable suspicion procedures and provides
ongoing administrative training to principals, assistant principals, directors, and
supervisors.
Outlined below is a graph providing information on the number of tests performed
annually and the number of positive tests resulting.
Employee Health Testing Statistics
Calendar Year 1999 -2002
10,000
1,474
1,417 1,511
1,210
1,000
Tests Performed
100 18 19 Positive Results
11 9
10
1
1999 2000 2001 2002
Over the four-year period, positive test results were obtained in less than 1% of the total
tests conducted. The ratio of positive tests to total tests conducted was relatively
consistent (approximately 1%) in each of the calendar years during the reporting period.
The data confirms the district鈥檚 success in maintaining a drug free workplace.
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2002/2003 Risk Management Annual Report
Safety and Security Program Safety and Security Program
Customer Service 鈥? Key Indicators
The Safety and Security program monitors the district鈥檚
School Board
alarm systems in order to dispatch appropriate response
Does the Safety and Security Program
personnel in emergency situations. These systems are support the district's strategic plan by
monitored 24 hours per day throughout the entire year. ensuring students attend a school that
is safe, secure and conducive to
Additionally, the Safety and Security Program monitors
student health and well-being?
the district鈥檚 emergency telephone hotline. The hotline
Schools
allows stakeholders to report information that may help
Does the Safety and Security Program
the district prevent potential emergencies, while assist to mitigate emergencies at the
remaining anonymous. school?
Employees
This program is geared towards supporting the district鈥檚 Do I and secure?environment that is
work in an
safe
strategic plan by ensuring students attend a school that is
safe, secure, and conducive to the student鈥檚 health and well being. This process also has
key indicators that will be utilized to assure the Risk Management Department is
providing quality customer service.
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