As you know, the City of Brentwood provides, at the City’s expense, basic term life and accidental death & dismemberment (AD&D) insurance for all employees of the City who regularly work 30 or more hours per week and elected officials. Qualified retirees are also provided basic term life insurance, however AD&D benefits are not available to retirees.
The face value of the term life benefit is $50,000 up to age 70. For individuals between the ages of 70-74, the benefit amount is reduced to $32,500 and after age 74 the benefit amount is reduced to $22,500.
The AD&D benefit amount is $100,000 for accidental death and $50,000 up to $100,000 for dismemberment, depending upon severity. The AD&D benefit amount is reduced to 65% of the active employee amount for individuals between the ages of 70-74 and 45% of the active employee amount for individuals over age 74.
The AD&D policy also has a Seat Belt feature which pays additional benefits in the case of accidental death in an auto accident if the insured party was wearing a seat belt and/or using airbags.
Current Plan:
Since 2015, the City’s insurance carrier for this employee benefit has been the Hartford Life and Accident Insurance Company of Hartford, CT. Under the current contract, effective January 1, 2018 through December 31, 2019, Hartford has charged the City at the rate of $0.28 per $1,000 of term life coverage per month and $0.03 per $1,000 of AD&D coverage per month. Based on the current number of eligible employees and elected officials (282), the total annual estimated cost to the City is approximately $57,500. There is also an additional expense for eligible retirees at a cost of approximately $4,800 annually which is paid from the OPEB Fund.
Renewal Proposal:
Representatives from Hartford recently informed City staff that the renewal rate for the current policy for a two-year period beginning January 1, 2020 through December 31, 2021 would increase by approximately 24%. This is partially as a result of the City filing three separate claims for benefits during the current two-year contract period totaling over $150,000. Since the inception of this policy in 2015 the City has filed seven separate claims totaling over $332,000.
To continue the current policy, this proposal includes an increase of $0.068 per $1,000 for term life insurance and no increase in AD&D coverage. Based upon the current number of covered individuals (282), the projected additional annual cost increase for group term life and AD&D insurance at the proposed premium increase for 2020 is approximately $11,500. With the proposed increased premium rates, the total projected cost of the group term life insurance and AD&D coverage for calendar year 2020 is estimated at $69,000 (up from $57,500 at the current annual cost).
To ensure the City receives the best available rate for this coverage our supplemental insurance broker, Ricky Hemmen requested competitive quotes from 10 other insurance companies offering identical coverage as the current plan. All 10 insurance companies declined to quote, primarily because they do not cover retirees or they require that we bundle other lines of coverage such as Long-Term Disability before they would consider providing a quote for Life Insurance. These companies included: Cigna, Principal, Prudential, Humana, Guardian, Lincoln Life, Sun Life, Standard Life, Unum and Mutual of Omaha.
Therefore, staff recommends approval of a two-year renewal of the contract with Hartford Life Insurance Company. |