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2011

Risk Management

Financial Report

For The Year Ended

June 30, 2011

Prepared By

Department of Finance

Patricia A. Phillips

Director

Acknowledgments….

The preparation of this report has been accomplished by the efficient and dedicated

services of the staff of the Division of Risk Management who have been assisted by

Sedgwick CMS staff. The contributions of all are invaluable and sincerely appreciated

and clearly reflect the high standards which have been set by the City of Virginia Beach.

Management - John F. Grook

Staff - Bernard “Bunk” Abey, Natalie Mann,

Joyce McElmurry, Anne Talley

Legal - Mark Stiles, Christopher Boynton,

Terry Jenkins

Technical Review - Joe Sanders, Hampton, VA

Dave Stoepker, HRT

Support Staff - Loretta Brown, Sandy MacKay,

Susan Marziani

Occupational Health – Michelle McCarthy

Sedgwick CMS - Mark Braley

Marsh - Scott Hoskins

It is also appropriate to thank the City Manager, Mayor and Members of City Council for

making possible an environment receptive to the planning and execution of risk

management functions within the city.

Sincerely,

Patricia A. Phillips, Director

Department of Finance

Table of Contents PAGE NO.

Transmittal Letter .......................................................................................................... 1

Executive Summary ...................................................................................................... 3

Industry Outlook............................................................................................................ 7

Risk Management Division ......................................................................................... 11

Workers’ Compensation Program .............................................................................. 12

Workers’ Compensation Claims and Costs ................................................................ 13

Insurance Procurement and Related Services ........................................................... 18

General Liability Claims ............................................................................................. 19

Automobile Liability Claims ........................................................................................ 20

Organizational Breakdown ......................................................................................... 23

Departmental Analysis…….……………..………………………………………..……...30

Significant Activities ................................................................................................... 55

Return-To-Work ........................................................................................................... 59

Future Direction........................................................................................................... 67

Operational Benchmarking ........................................................................................ 73

Tables ........................................................................................................................... 79

Financial Statements .......................................................................................... 79

Risk Management Expenditures Detail ……………………………………………..83

Insurance Program ............................................................................................. 85

Organizational Structure ..................................................................................... 87

General Liability Claims ...................................................................................... 88

Automobile Liability Claims ................................................................................. 89

Workers Comp Claims Frequency ...................................................................... 90

Workers Comp Claims Severity .......................................................................... 91

Internal Service Fund ......................................................................................... 92

Hampton Roads WC Benchmarking Study ......................................................... 93

Terms and Definitions ................................................................................................. 95

(This Page Intentionally Left Blank)

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December 13, 2011

Mr. James K. Spore, City Manager

Municipal Center

Virginia Beach, Virginia 23456

Dear Mr. Spore:

The Risk Management Financial Report of the City of Virginia Beach, Virginia for the

fiscal year ended June 30, 2011, is hereby submitted. Responsibility for the accuracy of

the data and the completeness and fairness of presentation, including all disclosures,

rests with the Department of Finance. To the best of our knowledge and belief, the

enclosed data are accurate in all material respects and are reported to present fairly the

results of risk management operations for the City.

The Risk Management Report is presented in ten sections: Executive Summary;

Industry Outlook; Risk Management Division; Organizational Breakdown; Significant

Activities; Return-To-Work; Future Directions; Operational Benchmarking; Supporting

Data; and Terms and Definitions.

The Risk Management Division had actual expenses of $10.1 million in FY11,

representing the costs of paying and processing claims, defending those claims, and

providing excess insurance. Workers’ Compensation continues to be a significant

portion of the Division’s activities, with costs of $6.8 million or 68% of total expenses.

It is also important to note that the Risk Management Division has $24.2 million in

outstanding actuarial liabilities for claims through June 30, 2011. The Fund is projected

to have a deficit of $13.2 million at June 30, 2012, or cash coverage of 45% of the

actuarial liability. The goal for cash coverage is to achieve 75% over the next four years.

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Mr. James K. Spore

December 13, 2011

Page -2-

Several performance measures for Risk Management have been identified and will,

over time, provide trend information. These measures for FY11 are as follows:

Cost of Risk per FTE $ 1,694 Cost of Risk per 1,000 population $22,953

These measurers for Virginia Beach are compared to the average of each measure for

a group of municipalities in the Hampton Roads area. Both of these measures are

higher for FY11 than for FY10, FY09 and FY08, but are down from FY07 and FY06.

During the year, the staff of the Risk Management Division rendered professional and

knowledgeable services to the City primarily in the administration of the City’s Risk

Management Internal Service Fund. This fund accounts for the self-insured portion of

workers compensation, general liability and automobile liability claims as well as the

premiums associated with purchased insurance. We are most appreciative of these

efforts and take this opportunity to recognize these outstanding public servants.

Respectively,

_________________________

Patricia A. Phillips

Director of Finance

________________________

John F. Grook

Risk Management Administrator

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Executive Summary

The purpose of this financial report is to share information to enable better understanding of the City’s insurance program, both insured and self-insured, including the costs associated with injuries and damages to private and public property. This report outlines claims history by the main types: automobile liability, general liability, and workers’ compensation as well as the insured portion of the program. The 2011 Risk Management Financial Report is a snap-shot as of June 30, 2011. All years are reported on a fiscal year basis from July 1st through June 30th. Risk Management is the Insurance Company to the city government offering Workers’ Compensation benefits to its approximately 7,000 members, protecting the almost $1 billion in real property assets and settlement of liability claims due to the operation of the largest city in Virginia. This review process begins by presenting a number of indicators used to measure the Risk Management function. These indicators include Total Cost of Risk per Full Time Employee (FTE), and Total Cost of Risk per 1,000 Population. The graph below details the cost per FTE for the past five years.

During 2011 the Total Cash Cost of Risk (TCOR) was $10,053,353, down slightly from FY10, and less than FY06, FY07, and FY09. While insurance premiums were basically flat, cost of medical care has risen over 10% a year for the past several years. Proactive measures such as the Return–To-Work Program and the efforts of the Disability Steering Committee helped to off-set these increases in the Cost of Risk per Full Time Employee (FTE).

$0

$500

$1,000

$1,500

$2,000

$2,500

FY06 FY07 FY08 FY09 FY10 FY11

$1,764 $1,881

$1,328 $1,549 $1,453

$1,694

$374 $172

$0

$244 $768

$96

Total Cost of Risk per FTE

Cash Basis Cost Unfunded Acturial Cost

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A second indicator is a widely accepted measure of the Total Cost of Risk per 1,000 Population. The 2011 cash cost is up slightly from FY10, and down significantly from FY09, FY07 and FY06. Also the unfunded actuarial cost has decreased by a factor of 10. The challenge is to hold the line on raising costs or lower the cost per 1,000-population. The total cost of maintaining the Risk Management function was approximately $9.9 million for the past fiscal year. This amount represents $0.02 on the Real Estate Tax rate. Of the total $10.1 million expenditure, workers compensation expenses amount to 68% of the total FY11 Risk Management budget.

The graph below demonstrates how the expenses of the Risk Management Division were distributed.

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

FY06 FY07 FY08 FY09 FY10 FY11

$27,907 $30,154

$21,491 $24,924

$22,539 $22,953

$5,915 $2,752

$0

$3,929 $11,912

$1,301

Total Cost of Risk per 1,000-Population

Cash Basis Cost Unfunded Acturial Cost

5

In summary, Risk Management Program associated costs are up from the prior fiscal year for the Cash Cost of Risk per FTE and for the cost per 1,000 Population. Both of these figures are internal comparisons to prior years and are below the highs of FY07 and FY06. This report is organized to first highlight the insurance industry outlook, major activity during the fiscal year, and then provide statistical data associated with the key functions of the Risk Management Division.

$6,831,577

$1,145,554 $302,462 $94,249

$1,066,430 $83,944

$367,817

$143,094

$102,170

$5,334,091

Total Cost of the 2011 Risk Management Function

Workers' Compensation Property Insurance Premiums Other Insurance Premiums

Legal Suppot & Services Liability Expenses Broker Fees/Actuarial Study

Salaries Benefits Other Administrative Costs

Unfunded Acturial Cost

6


7

Industry Outlook1

Entering 2011, public entities continued to experience budget deficits, with staff reductions occurring in all areas, including risk management and safety. Public entities are being pressured to reassess property values, creating potential additional reductions in revenues in areas of the country negatively affected by the housing market downturn. Many public entities that were able to retain personnel last year due to stimulus funds are faced with shrinking essential services (police, teachers, social services) as those funds are depleted.

Cost Control

Focusing on reducing health care and workers’ compensation costs is leading some public entities to consider providing health care for employees and their families through local health departments or by opening their own clinics. Previously uninsured public entities and those relying solely on tort caps or sovereign immunity are now beginning to take another look at purchased insurance in order to avoid exposure to an unanticipated and/or unfunded catastrophic claim.

With respect to funding claims, public entities are taking two approaches based on their risk appetite or their local environment. Some are refusing to pay higher premiums for excess coverage and will increase their retentions significantly to reduce the insurance line in their budgets. They reason that the higher retentions will not significantly affect their funding while those claims are “green.” Other entities are reducing their claims funding – as local boards and commissions eye claims funds for other uses- and prefer to pay higher premiums for lower retentions.

There is increased awareness of cyber risk, data security, and privacy issues in municipalities and public utilities. This has increased interest in training to reduce the likelihood of a claim and in insurance options for those exposures.

Primary and Excess Casualty

The public entity insurance market has remained relatively stable since the end of 2009. Typically there has been little to no change in underlying excess casualty rates and programs, with exceptions where losses are trending negatively. Most underwriters are holding firm on flat rates if exposures are up and the program is performing as expected. Where exposures are down, underwriters may push for a flat premium. Although some underwriters are pushing for increases in rates, competition among insurers is keeping rates generally flat, unless losses are deteriorating. Increases, where they are occurring, are typically in the one percent to five percent range. Unusual situations may warrant higher increases, Carriers are offering higher retentions to reduce rates for those clients who are truly interested in reducing their premiums.

1 North American Insurance Market Report 2011 – Marsh Mercer Kroll Guy Carpenter Oliver Wyman

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Workers’ Compensation Workers’ compensation incumbent carriers are starting to push back on rates and/or retentions, depending on the environment in the state and whether or not there are presumptive cause statutes. Some carriers will offer higher retentions while keeping rates flat, while others may offer a lower two-year guaranteed rate to encourage clients to increase their retentions. For self-funded workers’ compensation and casualty programs, premiums are still driven almost entirely by the carrier’s actuarial projections, modified where a larger percentage of hazardous exposures (fire/police/health care) exist, with underwriters having relatively little flexibility on pricing. Although the market remains competitive, albeit for a relatively limited marketplace, incumbents are tending to retain business. This could be attributed to long-term relationships or risk managers’ reluctance to switch carriers in an already rapidly changing environment. Legislation and Regulation The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 brought sweeping changes to financial regulation with the aim of restoring public confidence in the financial system, preventing further crises, and detecting future asset bubbles. The Act focused on the banking industry, but included significant changes for the U.S. insurance industry. The Act established the Federal Insurance Office (FIO), a body that will monitor the insurance industry and identify issues or gaps in insurance regulation.

What does all of this mean for the City?

As public entities continue cost-reduction measures, there could be increases in workers’ compensation and employment practices claims, which could result in increased rates and higher retentions. If this does happen, it is possible that insurers would take advantage of the opportunity to increase pricing across the board.

The use of DNA testing related to law enforcement, jails, and detention centers may result in increased claims relating to wrongful incarceration if the results are used to overturn convictions. We could also see claims where DNA testing is refused.

Some states have begun limiting the application of sovereign immunity in contractual arrangements where individual public entities have agreed to indemnify private parties. There is potential for carriers to take a closer look at clients’ contracts and evaluate more carefully broad form insured wording and waiver of subrogation wording.

9

We can expect insurance premiums to increase by as much as 15% for the renewal occurring in 2012. Workers’ compensation insurance administrative fees have already been increased for 2012.

10


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Risk Management Division and its Role

Risk Management is a division of the Finance Department and serves as the insurance company for the City. The Risk Management Division was established to provide risk prevention and mitigation services aimed at reducing the City’s overall losses, in a manner which supports the City’s strategic mission and objectives. Additionally, the Risk Management Division strives to continuously improve the delivery of such services. Risk Management works with Occupational Health and Safety in identifying areas for training or prevention.

The many services provided by Risk Management include the adjustment of liability claims, which include property damage, bodily injury and physical damage. In addition, Risk Management is responsible for “Employee Honesty” bonds covering all employees. Risk Management in 2011 administered vehicle titles for over 700 purchased/sold/ seized/auctioned vehicles. Risk Management, in concert with Occupational Safety and Health, is now working with the operating departments via the Risk Management and Safety Committee to assist in making the workplace a safe one for all employees. There are two Claims Adjusters for liability and one Claims Adjuster handling workers’ compensation claims for City employees who are injured on the job. Risk Management also provides insurance coverage for all City-owned buildings and, vehicles as well as all City-owned property. The stated mission of the Risk Management Division is: to “actively protect the present and future assets of the City of Virginia Beach government while providing the services to maintain a high quality of life for its citizens.”

The goal of risk management is threefold: to create a safe workplace; to prevent catastrophic financial losses that have the potential to bankrupt a government; and to provide budgetary stability. Risk management eliminates or reduces the detrimental effects of those risks that cannot be avoided, and protects the government and its employees from unnecessary loss. The City 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 City 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 City. The following programs provide specific details of each area.

Self-Insured Claims Administration – Workers’ Compensation, General Liability, and Auto Liability in accordance with legal requirements

Insurance Procurement

Vehicle Titling

Payment of Legal and other Costs in Defending Claims

Risk Management is generally defined as exposure identification; risk evaluation; risk control; risk funding; and risk management administration, all aimed at minimizing the City’s Total Cost of Risk.

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The Risk Management Division accounts for all costs through the Risk Management Internal Service Fund. The table on the following page summarizes the actual expenses of the Risk Management Division for July 1, 2010 through June 30, 2011.

Risk Management Division 2011 Actual Expenses

Program Expense Amount % of Total Expenses

Workers’ Compensation $6,832,577 67.96%

Property Insurance Premiums $1,145,554 11.39%

Other Insurance Premiums $ 302,462 3.00%

Legal Support & Services $ 94,249 0.94%

GL and Auto Liability Expenses $1,066,430 10.61%

Broker Fees/Actuarial Study $ 83,944 0.83%

Salaries $ 367,817 3.66%

Benefits $ 143,094 1.42%

Other Administrative Expenses $ 102,170 1.01%

Total $10,053,353 100.00%

Actual expenses for Risk Management for FY11 were $10,053,353. Of this amount, $6,832,577 was spent for workers’ compensation expenses, representing 68% of total expenses. Included in the Supporting Data Section are the financial statements for Risk Management for FY11. These include the Combining Statement of Net Assets, the Combining Statement of Revenues, Expenses and Changes in Net Assets, the Combining Statement of Cash Flows, and a detailed breakdown of 2011 Risk Management costs by line item. It is important to note that the Risk Management Division has $24.2 million in outstanding actuarial liability. The fund has a deficit at June 30, 2011 of $10.8 million. The projected deficit for June 30, 2012 is $13.2 million resulting in a deficit in net assets of $18.6 million. Workers Compensation Program

Workers’ compensation is the highest priority for Risk Management focus due to its financial impact. As stated earlier, workers compensation accounts for 67% of the entire Risk Management costs. The workers’ compensation program is the mechanism by which statutory benefits prescribed by Virginia state law are provided to an employee due to a job-related injury (including death) resulting from an accident or occupational disease.

There are two major types of benefits paid by the City for workers’ compensation related injuries. Medical benefits include payment for medical treatment, causally related to the compensable accident. The treatment must be provided for as long as necessary. Treatment is generally provided by a physician chosen from a panel of at least three physicians provided by the City. The second type of benefit is indemnity benefits. When incapacity from work is total, the City must pay 66 2/3% of the employee’s average weekly wages for up to 500 weeks.

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The workers’ compensation program includes a claims management function. This function entails the management of the City’s third-party liability and workers’ compensation claims. The Risk Management Division employs a Third Party Administrator (TPA), Sedgwick CMS, to assist with the implementation of the Workers’ Compensation program. Services provided by the TPA include claims investigation, establishing loss reserves, claims adjusting, and claims payment processing.

Data is provided on the following pages to provide a historical perspective. All information is reported by fiscal year even though the City’s policy periods do not correlate to the fiscal year.

Workers’ Compensation Claims and Costs

The largest portion of workers compensation expense is due to medical costs as well as the severity of injuries. Closely related to workers’ compensation costs is the cost of job-related disability retirements. Years 2010 and 2011 are still maturing and as better data is available, the numbers will increase.

A brief analysis of workers’ compensation activity for the City during FY10 resulted in the following findings:

There were 1,172 total claims filed

FY2011 experienced a 0.9% decrease in the number of claims (11 claims)

In FY2011, indemnity claims increased by 33%, however medical-only claims decreased by 22.2%

Fiscal Years 2008 ($7.1 Million) and 2009 ($5.8 Million) have the highest paid and highest incurred amounts

Overall program reserves estimated remaining cost of outstanding claims decreased 12.8%

o Outstanding reserves 06/30/2011 = $17,845,782 o Outstanding reserves 06/30/2010 = $15,816,477 o Decrease 06/30/2010 to 06/30/2011 = ($2,029,305)

There were 44 open claims with subrogation potential

There were 28 open litigated claims for the fiscal years 2004-2011. Litigation has been resolved on the majority of these losses but the claims remain open.

There were 11 open claims that have been reported to the excess carrier. One of these claims has pierced the SIR. Reimbursement is being requested from the excess carrier.

There have been 115 claims denied for the period 07/01/2010-06/30/2011. Reserves on these denied claims total $29,650

There are 35 open presumption claims with a total incurred of $12,268,832. These claims represent 32% of the entire program. The incurred for all open claims is $39 Million.

o The Virginia Workers’ Compensation Act, Section 65.2-402 pertains to the “Presumption as to death or disability from respiratory disease, hypertension or heart disease, cancer.” Respiratory diseases that cause (i.) the death of volunteer or salaried firefighters or Department of

14

Emergency Management hazardous materials officers or (ii) any health condition or impairment of such firefighters or Department of Emergency Management hazardous materials officers resulting in total or partial disability shall be presumed to be occupational diseases, suffered in the line of duty, that are covered by this title unless such presumption is overcome by a preponderance of competent evidence to the contrary.

The top five departments in terms of loss experience are:

Department Claim Count Incurred % of Program

Police 195 $855,884 24.90%

Parks & Recreation 147 $161,375 18.77%

Public Works 117 $315,893 14.94%

Fire 66 $242,664 8.43%

Human Services 62 $184,080 7.91%

Cost containment results netted a total savings of $1,207,707.23

The medical bill average turnaround time (07/01/2010 – 06/30/2011) = 13 days

The closure ratio from 2006 -2011 is 103.2%

The top five losses by accident type for 2011:

Accident Type Claim Count

Incurred (Paid plus Unfunded Obligation)

Running and Training 73 $257,028

Struck/Injured by Hand Tool 17 $182,809

Fall/Slip on Ice or Snow 34 $173,907

Fall On the Same Level 40 $167,549

Lifting 64 $135,641

The City incurred an average of $2,994 per claim. The Sedgwick comparison group incurred an average of $3,735 per claim.

Incurred and open claims o City: 308 open, $37M incurred o Police: 141 open ( up 6%); $18M incurred o Public Works: 53 open (up 2%); $3.7M incurred o Fire: 44 open (down 4%); $6.9M incurred o Parks & Recreation: 40 open (down 2%); $2.9M incurred o Human Services: 30 open (up 43%); $657K incurred

The table on the next page summarizes the number of open workers’ compensation claims and future reserves by fiscal year. Claims mature over time, so the number of claims open decline over time. Past years have fewer open claims than current years. The current number of open claims is 361. Reserves decreased from 2010 to 2011 by $2,029,305.

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Open Workers’ Compensation Claims by Fiscal Year

Claim Year Open as of 6/30/2010

Open as of 6/30/2011

Unfunded Obligations as

of 6/30/2010

Unfunded Obligations as

of 6/30/2011

FY91 2 2 $136,948 $104,142

FY92 1 3 $334,253 $530,468

FY93 1 1 $21,024 $27,795

FY94 2 2 $196,688 $188,493

FY95 0 0 $0 $0

FY96 1 1 $39,610 $38,090

FY97 2 3 $198,192 $145,439

FY98 0 0 $0 $0

FY99 2 1 $17,911 $30,008

FY00 2 4 $45,738 $53,827

FY01 5 4 $174,112 $163,889

FY02 5 4 $813,952 $739,586

FY03 2 3 $78,322 $50,688

FY04 12 12 $1,316,457 $955,636

FY05 22 19 $3,183,806 $2,627,914

FY06 18 15 $2,906,458 $2,030,572

FY07 18 16 $1,760,895 $1,437,427

FY08 30 21 $3,045,673 $2,853,143

FY09 51 25 $2,577,309 $1,942,694

FY10 191 42 $998,434 $1,027,301

FY11 0 183 $0 $889,364

Total 367 361 $17,845,782 $15,816,477

The table below summarizes the number of workers’ compensation claims filed, incidents only and the resulting expenses incurred over the last five fiscal years. Years 2010 and 2011 are still maturing and as better data is available, the numbers will increase. (See above).

Workers’ Compensation Claims – Medical & Indemnity

Claim Type 2007 2008 2009 2010 2011

Indemnity 124 129 173 219 292

Incident Only 537 409 315 386 389

Medical Only 754 673 674 600 491

Total 1,415 1,211 1,162 1,205 1,172

The data in the above table show that for the period 2007 thru 2011, the number of medical claims filed has decreased by 35%, while the number of indemnity claims in 2011 has increased by 135%, the overall number of claims filed and incidents from 2007 to 2011 has decreased by 17%.

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Workers’ Compensation Paid – Medical, Indemnity & Reserves

Fiscal Year of Origin 2007 2008 2009 2010 2011 Medical Only Paid $551,365 $526,055 $421,516 $510,386 $975,305

Indemnity with Medical Paid

$1,098,054 $1,692,324 $3,358,278 $2,018,207 $367,881

Reserves $3,437,427 $4,947,880 $1,978,497 $1,061,289 $1,038,260

Incurred $5,086,846 $7,166,259 $5,758,291 $3,589,882 $2,381,446

Note: Amounts represent payments made against claim in originating year and all subsequent years.

Medical only claims include medical costs for minor injuries with less than 7 days of lost time. Indemnity claims include wage payments for lost time compensated at 66 2/3% of the injured worker’s average weekly wage tax free up to a maximum of 500 weeks and medical payments as long as needed.

The data in the above table show that for the period 2007 thru 2011, the total paid for medical claims has increased by 77%, while the total paid for indemnity claims has decreased by 66%. It is important to note however, that a significant percentage of the claims costs for 2011 have not yet been paid. As the outstanding payments are made the cost for 2011 will likely meet or exceed the cost for 2010. The data also shows that total reserves have decreased by 70%. It should be noted that the claims in the most recent fiscal years have not matured. Because of the complex nature of indemnity claims, in some cases it can take two years from the date of injury to accurately establish the reserve. It is expected that as more detailed information is received concerning diagnoses and treatment plans that the reserves for 2010 and 2011 will be adjusted upward.

The graph below demonstrates the cost associated with medical claims, indemnity claims and reserves for the period 2006 through 2011.

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

2007 2008 2009 2010 2011

2011 Workers' Compensation Paid To Date & Unfunded Obligations

Indemnity Medical Only Unfunded Obligations

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An analysis of claims occurring in FY07, FY08, and FY09 and the changing total incurred for these claims in the following years vividly demonstrates the dynamic increase in total incurred (including future reserves) as claims age.

The chart below clearly shows that claims occurring in FY07 have increased to over four times their original value in four years. Claims occurring in FY08 have increased to over four times their original value in three years. And claims occurring in FY09 have increased 6% over their original value in two years. Based on this analysis, the total incurred for FY10 and FY11 can be expected to increase to as much as four times their current value.

Workers’ Compensation Limits The City of Virginia Beach is certified by the Virginia Workers’ Compensation Commission as self-insured for workers’ compensation benefits. Workers’ compensation losses are paid from the Risk Management Fund up to the Self-Insured Retention amount. The current Self Insured Retention is $850,000 per claim. Excess Coverage provides a Stop-Loss at $850,000 up to $25,000,000 for compulsory coverage for the medical costs, lost wages and other compensation for all work-related employee injuries and coverage diseases.

The City of Virginia Beach is a municipality that retains a significant portion of its workers’ compensation exposure. The retained limits of liability range from $200,000 in 1985, rising to $850,000 in 2007-11.

$0.00

$1,000,000.00

$2,000,000.00

$3,000,000.00

$4,000,000.00

$5,000,000.00

$6,000,000.00

$7,000,000.00

$8,000,000.00

FY07 FY08 FY09 FY10 FY11

Claims Maturation

FY07 Claims FY08 Claims FY09 Claims FY10 Claims

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Historical Program Retentions

Policy Period Excess Workers’ Compensation Coverage SIR 07/01/1985 – 06/30/1987 $200,000

07/01/1987 – 06/30/1988 $250,000

07/01/1988 – 06/30/1989 $300,000

07/01/1989 – 06/30/1990 $400,000

07/01/1990 – 06/30/1992 $450,000

07/01/1992 – 06/30/2005 $500,000

07/01/2005 – 06/30/2006 $750,000

07/01/2006 – 06/30/2007 $750,000*

07/01/2007 – 06/30/2011 $850,000

The Workers’ Compensation retention changed from $750,000 to $850,000 on March 1, 2007.

During soft markets the entry of new carriers may allow opportunities to lower SIR’s or stop-loss. Analysis of premium cost, actuarial benefit and recoveries are several factors that should be taken into account when changing retention levels.

Insurance Procurement and Related Services

Insurance procurement is another of the key functions within the Risk Management Division. This function consists of the procurement of the City’s property insurance policies, insurance verification for vendors and contractors, and contractual review of insurance and indemnification provisions for the various contracts and agreements entered into by the City. It includes first party insurance that indemnifies the owner or user of property for its loss when the damage is caused by a covered peril such as fire or explosion. Also covers the financial loss due to business interruption. Current policy limits are $1 Billion with $50,000 deductible (peril coverage). In 2011, Risk Management reviewed approximately 258 contracts for insurance requirements.

Property Limits – The Risk Management Fund will pay property losses such as wind, fire, flood, earthquake, explosion, etc. which are in excess of $1,000. The department experiencing a self-insured property loss will be responsible for the first $1,000 of any such loss. The total amount of any loss payable from the Risk Management Fund shall not exceed the actual cost to repair, restore, or replace property in like kind and quality.

Table I in the Supporting Data Section lists information related to the property insurance program.

The City purchases several lines of excess insurance to protect its assets and operations. These include general liability, automobile liability, property, and workers’ compensation. The City procures these lines of coverage to supplement its self-insurance program detailed in Table I in the Tables and Supporting Data Section. The Self-Insurance Internal Service Fund finances the City’s liability losses up to the $2,000,000 and purchases excess liability coverage up to $10,000,000 per occurrence and $20,000,000 in aggregate. Once the Self-Insured Retention (SIR) has been exceeded, the additional loss expenses are reimbursed to the City by the excess insurer.

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General Liability Claims

General liability insurance protects the City from most liability exposures other than automobile and professional liability. The City self-insures for claims of $2 million or less. General liability claims manifest themselves soon after an incident and liability determinations are made quickly. All claims are thoroughly investigated with a prompt response in the way of either payment or denial.

The table below outlines the number of general liability claims filed and the resulting expenses incurred over the last five fiscal years.

Citywide General Liability Losses

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Claim Count 498 448 343 347 279

Paid $349,226 $1,275,884 $275,999 $301,964 $175,997

Reserves (as of

6/30/2011) $6,501 $1,200 $200 $109,332 $54,726

Incurred $355,727 $1,277,044 $276,199 $411,296 $230,723

Avg. Per Claim $714 $2,851 $805 $1,185 $827

* The increase in 2008 is due to the fact that the City paid over $900,000 to outside counsel who was successful in defending the City against a lawsuit which set the ground work for defense of two similar lawsuits.

The data in the above table show that for the period 2007 through 2011, the number of claims filed has decreased by 44%, the amount paid has decreased by 50%, reserves have increased by 741%, incurred has decreased by 35%, and the average amount paid per claim has increased by 14%. One possible explanation for the increase is that claim counts are down, thus fewer claims cause the average to go up.

In the last three years the City has been promptly investigating, paying or denying claims within 30 to 60 days. Statistics will support the facts that the longer a claim is open, the more expensive it will become. Additionally, the City has aggressively applied depreciation to property damage claim settlements when applicable further reducing payment amounts. All general liability claims have been adjusted in-house with no outside assignments other than appraisal services. Finally, we do not solicit claims and rarely open a claim file until the written notice of claim is actually received.

General Liability and Public Official’s Liability Limits – General liability and public official’s liability losses are paid from the Risk Management Fund; either wholly or to the extent of the self-insured retention amount of any general liability or public official’s liability insurance maintained by the City. The City’s excess liability policy with States Self Insured Risk Retention Group (STATES) also covers general liability and public officials’ liability claims.

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Automobile Liability Claims

There are many factors that affect the adjustment of automobile liability claims. There are often issues of contributory negligence, immunity and personal injuries. They can sometimes settle quickly when liability can be clearly established although some claims can take years to litigate when there are multiple parties involved and issues that can only be resolved through the court system. Many small claims are easy to assess and settle. A small number of claims can result in some high payouts for severe injuries.

The table below outlines the number of automobile liability claims filed and the resulting expenses incurred over the last five fiscal years.

Citywide Automobile Losses

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Claim Count 170 132 98 73 87

Paid $504,989 $345,200 $321,170 $170,268 $129,816

Reserves (As of

6/30/2011) $0 $10,000 $0 $84,968 $80,837

Incurred $504,989 $355,200 $321,170 $255,236 $201,653

Avg. Per Claim $2,971 $2,691 $3,277 $3,496 $2,318

The data in the above table show that for the period 2007 thru 2011, the number of claims filed has decreased by 49%, the amount paid has decreased by 74%, reserves have increased, incurred has decreased by 60%, and the average amount paid per claim has increased by 22%.

Typically, except with bodily injury, an automobile liability claim file is opened when a written notice of claim is received. All automobile claims have been investigated and handled within the Risk Management division versus being sent to an independent adjustment company. Bodily injury claims are negotiated either directly with the claimant or with their attorneys. Outside appraisers are used to inspect and provide written repair estimates assuring that we pay for only accident related damages, use aftermarket parts when available and pay prevailing labor rates.

Automobile Liability Limits - The Commonwealth of Virginia, Department of Motor Vehicles as a self-insurer for automobile liability, certifies the City of Virginia Beach. Automobile liability losses are paid from the Risk Management Fund either wholly or to the extent of the self-insured retention amount (currently at $2,000,000) of any automobile liability insurance program maintained by the City. The excess policy with States provides an additional $10,000,000 for any one occurrence and up to $20,000,000 for claims in any one year period.

Disaster Recovery/Public Assistance Services

An important function of Risk Management is the recovery of City assets after a disaster. The Stafford Act authorizes financial assistance to State and local governments following presidentially declared major disasters and emergencies. The

21

Stafford Act describes the declaration process, the types and extent of assistance that may be provided, and fundamental eligibility requirements. Threshold for eligibility for 2010 was an incurred loss of $3.23 per citizen or approximately $1.39 million in damages. Reimbursement is based on a formula assigned to each locality based on a number of factors. The City of Virginia Beach was reimbursed 75% from FEMA, 18% from the State and 7% from local funds for each disaster. On November 11 thru the 16th, 2009, the City experienced the remnants of a hurricane in the form of a November Nor’-Easter. The damages resulted in approximately $2.5 million in damages to city and school facilities. Risk Management coordinated the reporting and recovery of losses of 51 small projects, those costing $61,900 or less each and nine larger projects costing over $61,900 each. The largest dollar project was debris removal that topped approximately $900,000. The remainder of the projects involved restoration of facilities which suffered damage. Restoration projects are divided into two categories: repairs done when the damage amounts to less than 50% of the replacement costs, and replacement when damages amount to more than 50% of the replacement costs. Insurance proceeds are deducted from eligible costs. $2,385,984 was recovered. FEMA Homeland Security is currently conducting an audit of our recorded expenses.

Subrogation Services

Subrogation is the process of seeking reimbursement from the responsible party and/or an insurance company when the damages are caused by the negligence of others. Risk Management acts as the insurance company for the city and subrogates against the responsible parties or their insurance companies for damages to city property to include vehicles, buildings, trees, etc. We vigorously pursue subrogation claims against the responsible party or their insurance companies and work with the City Attorney’s office when legal action becomes necessary.

Subrogation Recoveries

2007 2008 2009 2010 2011

Recoveries $329,424 $170,439 $306,886 $262,563 $287,289

The above table reflects subrogation collections based on the year the damage occurred, not the year the monies were collected. On occasion, it can take several months to get payment for damages from either the insurance company or the responsible individual. Other times, we make payment plans with the responsible party and have them sign stipulation agreements agreeing to regular monthly payments. Collections in 2010-2011 have taken a slight upturn although they are still down from the high achieved in 2007.

Risk Management attempts to collect money owed to city departments from responsible parties for damages to city vehicles. When money is recovered, Risk Management reimburses Public Works/Automobile Services for amounts less than $1,000 and the Insurance Recovery Fund for amounts over $1,000. It is understood that departments with the larger number of vehicles on the road and with the most mileage incurred tend to have a greater frequency of accidents.

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Organizational Breakdown

For purposes of reporting, an organizational structure has been defined where all budget units have been assigned to one of four organizational units. The organizational units have been defined as:

Administration & Public Safety

Health and Human Services

Infrastructure

Economic Development/Vitality

Table II in the Supporting Data Section of this report reflects the details of the budget unit assignments as well as the Administrator responsible for each area.

For local governments, risk is ordinarily associated with the delivery of public services. This is generally classified as operational risk. Risk encountered in the course of delivering governmental services – risk that include potential property loss, worker injury, and lawsuits can also be viewed as pure risks. With pure risks, there is no upside; either the government incurs a loss or there is no loss at all.

Workers’ Compensation Analysis - Data for the current fiscal year and four prior fiscal years has been compiled for workers’ compensation losses. The table below outlines the total Workers’ Compensation loss for each organization unit for the past five fiscal years.

Total Workers’ Compensation Losses by Organizational Category

Organizational Unit 2007 2008 2009 2010 2011

Admin/Public Safety $1,967,696 $1,808,044 $857,763 $769,268 $782,658

Health $ 441,347 $ 489,239 $216,066 $252,331 $183,783

Infrastructure $ 561,384 $ 295,143 $214,221 $262,776 $309,022

Economic Dev. $ 55,877 $ 243,846 $146,274 $ 43,265 $67,722

Organizational Unit Salary % Total Salary FTEs % Total FTs

Admin/Public Safety $137,171,809 43.58% 2,620.61 38.30%

Health $ 84,253,454 26.77% 2,206.80 32.25%

Infrastructure $ 73,071,762 23.21% 1,541.68 22.53%

Economic Dev. $ 20,286,108 6.44% 473.95 6.92%

Total $314,783,133 100.00% 6,843.04 100.00%

The data in the above table show that for the period 2007 thru 2011, the loss for Administration has decreased by 60%, for Health have decreased by 58%, for Infrastructure has decreased by 45%, for Economic Development has increased by 21%. Administration accounts for 38% of the total FTEs and 44% of the budgeted salaries, Health accounts for 32% of the total FTEs and 27% of the budgeted salaries, Infrastructure accounts for 23% of the total FTEs and 23% of the budgeted salaries, and Economic Development accounts for 7% of the total FTEs and 6% of the budgeted salaries.

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An analysis of losses by accident type for 2011 was conducted. The top 10 accident types are detailed below:

Cause Description Claim Type Claim Count Incurred Average Incurred

Running and Training Indemnity 25 $236,684 $9,467

Incident Only 22 $0 $0

Medical Only 26 $20,345 $783

Total 73 $257,028 $3,521

Struck/Injured By Hand Indemnity 2 $178,083 $89,041

Tool or Machine in Use Incident Only 5 $0 $0

Medical Only 10 $4,726 $473

Total 17 $182,809 $10,753

Fall/Slip on Ice or Snow Indemnity 6 $129,855 $21,643


Medical Only 16 $44,052 $2,753

Total 34 $173,907 $5,115

Fall On the Same Level Indemnity 11 $145,559 $13,233


Medical Only 11 $21,990 $1,999

Total 40 $167,549 $4,189

Lifting Indemnity 16 $92,566 $5,785


Medical Only 38 $43,075 $1,134

Total 64 $135,641 $2,119

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

$2,000,000

Admin Health Infrastructure Economic Dev

2011 Workers' Compensation Total Paid

FY07 FY08 FY09 FY10 FY11

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Cause Description Claim Type Claim Count Incurred Average Incurred

Pushing or Pulling Indemnity 10 $85,729 $8,573


Medical Only 23 $44,057 $1,916

Total 38 $129,787 $3,415

Overexertion Indemnity 22 $117,913 $5,360



Total 33 $121,684 $3,687

Bodily Reaction Indemnity 19 $66,221 $3,485


Medical Only 7 $18,381 $2,626

Total 31 $84,602 $2,729

Heart attach/Condition Indemnity 5 $79,490 $15,898

Total 5 $79,490 $15,898

Fall, Slip or Trip, NOC Indemnity 2 $74,717 $37,359



Total 12 $77,760 $6,480

Sedgwick Claims Management provided an analysis of workers’ compensation claims for 2011. The information is broken down by frequency (percent of total claims) and severity (percent of total incurred) by department. The results of this analysis are contained in Tables IV and V in the Supporting Data Section of this report. Automobile/General Liability Analysis - Data for the current fiscal year and four prior fiscal years has been compiled for general and automobile liability losses. Table III in the Supporting Data Section shows the detailed information for general and automobile liability losses for FY 2007 through FY 2011. In summary, the information in this table reveals the following analysis: Overall analysis of general liability claim count shows a decrease of approximately 59% between 2007 and 2011. The largest decrease in claims occurred in the Economic Development area where claims were down approximately 83%. The smallest change occurred in Infrastructure where claims were down 57%. Typically, during an economic downturn, claims tend to increase but that does not appear to be the case here. The difference may be explained by a difference in how claims are established and handled. In prior years when a claimant telephoned and inquired as to how to file a claim, one was automatically set up. Currently, a claim is not set up until an actual written notice of claim is received. The difference between phone calls and actual claims received can be as much as 30 to 40%.

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Overall analysis of general liability payments shows that payments have decreased approximately 51% between 2007 and 2011. The largest decrease in claims occurred in the Economic Development/Vitality area where claims were down to $0. In the Infrastructure area, payments have decreased by 22%. The increase in 2008 is due to the fact that the City paid over $900,000 to outside counsel who was successful in defending the City against a lawsuit which set the ground work for defense of two similar lawsuits.

Overall analysis of general liability reserves shows that reserves have increased approximately 84% between 2007 and 2011. The largest increase in reserves occurred in Infrastructure where reserves increased from $0 in 2007 to $37,804 in 2011.

0

100

200

300

2007 2008 2009 2010 2011

2011 General Liability by Organization-Claim Count


$0.00

$200,000.00

$400,000.00

$600,000.00

$800,000.00

$1,000,000.00

$1,200,000.00

2007 2008 2009 2010 2011

2011 General Liability-Paid


27

There have also been increases in the Economic Development and Health and Human Services areas over the past four years.

Overall analysis of general liability incurred shows that amounts have decreased approximately 38% between 2007 and 2011. The largest decrease in incurred expenses occurred in the Health and Human Services area where amounts were down approximately 86%. In the Infrastructure area, incurred costs have decreased by approximately 3%.

Overall analysis of automobile liability claim count shows that claim counts have decreased approximately 49% between 2007 and 2011. The largest decrease in claims occurred in the Administration & Public Safety area where claims were down

$0.00

$100,000.00

$200,000.00

$300,000.00

$400,000.00

$500,000.00

$600,000.00

$700,000.00

2007 2008 2009 2010 2011

2011 General Liability-Reserves


$0.00

$500,000.00

$1,000,000.00

$1,500,000.00

2007 2008 2009 2010 2011

2011 General Liability-Incurred

Admin Health Infrastructure Economic Development

28

approximately 65%. The smallest change occurred in Infrastructure where claims were down 3%.

Overall analysis of automobile liability payments shows that payments have decreased approximately 78% between 2007 and 2011. The largest decrease in payments occurred in the Health and Human Services area where payments were down approximately 88%. Economic Development/Vitality decreased the least at 47%.

Overall analysis of automobile reserves showed that reserves have increased between 2007 and 2011. Increases occurred in Administration and Public Safety, Infrastructure, Health and Human Services and Economic Development. Infrastructure accounted for the largest increase in reserves.

0

10

20

30

40

50

60

70

80

90

2007 2008 2009 2010 2011

2011 Auto Liability-Claim Count


$0.00

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

2007 2008 2009 2010 2011

2011 Auto Liability-Paid


29

Overall analysis of automobile liability incurred shows a decrease of approximately 60% between 2007 and 2011. The largest decrease occurred in the Health and Human Services area where incurred is down approximately 67%. Economic Development/Vitality decreased by 40%.

Administration accounts for 32.9% of assigned vehicles and 38.2% of all vehicle values, Health accounts for 21.7% of assigned vehicles and 11.97% of all vehicle values, Infrastructure accounts for 40.5% of assigned vehicles and 47.77% of all vehicle values,

$0.00

$20,000.00

$40,000.00

$60,000.00

$80,000.00

$100,000.00

$120,000.00

2007 2008 2009 2010 2011

2011 Auto Liability-Reserves


$0.00

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

2007 2008 2009 2010 2011

2011 Auto Liability-Incurred


30

and Economic Development accounts for 4.9% of assigned vehicles and 2.06% of all vehicle values, Departmental Analysis Individual departments were analyzed to determine the highest frequency and severity of claims. Departments which incurred 5% or more of the total claims (frequency) and 5% or more of the incurred costs (severity) were analyzed. Also included in the analysis were those departments who experienced a low level of frequency and severity. The table below summarizes the frequency of claims information.

Departments with Highest Workers’ Comp Claims Frequency FY11

Department Claim Count % of Frequency Lag Time

Police 291 24.83% 2.38 days

Parks & Recreation 208 17.75% 3.75 days

Public Works 159 13.57% 6.41 days

Sheriff 131 11.18% 6.74 days

Human Services 90 7.68% 5.11 days

Fire 77 6.57% 4.41 days

Emergency Medical Service 63 5.38% 2.00 days

All Others 153 13.04%

Grand Total 1,172 100.00% 4.30 days

Grand Total includes incident only claims

Departments with Low Workers’ Comp Claims Frequency FY11

Department Claim Count % of Frequency Lag Time

Public Utilities 45 3.84% 9.52 days

For the frequency analysis, Police experienced the highest frequency of 24.83% (291 claims out of 1,172); Parks and Recreation experienced the second highest frequency of 17.75% (208 claims out of 1,172); Public Works experienced the third highest frequency of 13.57% (159 claims out of 1,172); Sheriff’s Office experienced the fourth highest frequency of 11.18% (131 claims out of 1,172); Human Services experienced the fifth highest frequency of 7.68% (90 claims out of 1,172); Fire experienced the sixth highest frequency of 6.57% (77 claims out of 1,172); and Emergency Medical Services experienced a frequency of 5.38% (63 claims out of 1,172). All remaining departments experienced a frequency of 13.04% (153 claims out of 1,172). Performing well on the frequency scale, Public Utilities experienced a favorable frequency rate. These seven departments accounted for 87% of all the workers’ compensation claims (frequency). The table on the next page summarizes the severity of claims information.

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Department with Highest Workers’ Comp Severity FY11

Department Incurred (Paid plus Unfunded Liability)

% of Incurred (Severity)

Police $ 855,884 35.94%

Public Works $ 315,893 13.26%

Fire $ 242,665 10.19%

Sheriff $ 209,540 8.80%

Human Services $ 184,080 7.73%

Parks and Recreation $ 161,375 6.78%

All Others $ 412,009 17.30%

Grand Total $2,381,446 100.00%

Departments with Low Workers’ Comp Severity FY11

Department Incurred (Paid plus Unfunded Liability)

% of Incurred (Severity)

Public Utilities $64,883 2.72%

For the severity analysis, Police experienced the highest severity of 35.94% ($855,884 incurred out of $2,381,446); Public Works experienced the second highest severity of 13.26% ($315,893 incurred out of $2,381,446); Fire experienced the third highest severity of 10.19% ($242,665 incurred out of $2,381,446); Sheriff’s Office experienced the fourth highest severity of 8.80% ($209,540 incurred out of $2,381,446); Human Services experienced the fifth highest severity of 7.73% ($184,080 incurred out of $2,381,446); Parks and Recreation experienced sixth highest severity of 6.78% ($161,375 incurred out of $2,381,446). All remaining departments experienced a severity of 17.30% ($412,009 incurred out of $2,381,446). Performing well on the severity scale was Public Utilities with a rate of 2.72%, a favorable severity rate. It should be noted that due to the nature of Police operations, it is expected that they will be in the top five in Frequency and Severity of claims. These six departments accounted for 83% of the total cost (severity).

The graphs on the follow page reflect the distribution of severity cost and percent to the highest performing departments.

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Each of these departments is discussed in detail on the following pages.

$855,884

$315,893 $242,665

$209,540

$184,080

$161,375

$412,009

2011 Departmental WC Incurred (Paid and Unfunded Liability)

Police Public Works Fire Sheriff Human Services Parks and Recreation All Others

24.83%

17.75%

13.57%

11.18%

7.68%

6.57%

5.38%

13.04%

2011 Departmental % of WC Incurred (Severity)

Police Parks and Recreation Public Works

Sheriff Human Services Fire

EMS All Others

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Police

The purpose of the Virginia Beach Police Department is to respond to crime and traffic- related concerns; investigate criminal and traffic incidents, apprehend criminal and traffic offenders; and initiate problem solving strategies to reduce crime and traffic incidents. The department examines the types of calls for service and utilizes various information systems to obtain accurate, timely information, identify crime and traffic trends, deploy resources, and analyze results. The focus of the department is to use a systematic approach involving all divisions within the department and coordinating with other agencies in an effort to effectively interact with the community, to prevent crime and traffic concerns, and to remove the criminal element from our neighborhoods. The Police Department is one of four departments involved in providing for public safety. Public safety activities are inherently high risk and involve the potential for financial loss. The department consists of seven divisions: Bureau of Animal Control; Detective Bureau; Investigative Division; Operations Division; Special Operations; Special Investigations; and the Support Division. Together these divisions account for over 1000 FTEs as specified in the 2011 budget. The probability of experiencing incidents increases in direct proportion to the number of people involved (exposed). Also the risks involved in providing for public safety are inherently high. At the close of FY11, the department had a total of 141 open claims (111 indemnity claims and 30 medical) with an incurred cost of $17,623,151 ($17,221,192 in indemnity claims and $401,959 in medical claims).

By way of comparison, the department experienced a total of 368 claims in FY10, with a total paid of $17,417,431 and an incurred amount of $35,263,213. While it is good news that the number of claims has decreased, it is too early to determine if paid and incurred has likewise decreased as these amounts generally increase as claims mature.

The major cause, nature and body part making up these claims is detailed below:

Greatest Frequency Greatest Severity

Cause Running and Training Claims=37 Expected Total Loss = $196,320

Running and Training Claims = 37 Expected Total Loss = $196,320

Nature/Result Contusion (Bruise, Skin Surface) Claims = 85 Expected Total Loss = $157,157

Strain Claims = 79 Expected Total Loss = $387,125

Part/Target Knee Claims = 38 Expected Total Loss = $151,619

Knee Claims = 38 Incurred = $151,619

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The table below documents the top five injury types resulting in claims by frequency and severity experienced by the department in FY11.

Top 5 Claims by Workers’ Comp Frequency/Severity FY11

Cause Frequency Count

Expected Total Cost

Cause Severity Count

Expected Total Cost

Running and Training

37 $196,320 Running and Training

37 $196,320

Altercation 21 $24,574 Fall/Slip on Ice or Snow

9 $114,177

Struck/Injured By Animal or In

14 $4,554 Overexertion 9 $65,440

Fall on Same Level

12 $64,880 Fall on Same Level

12 $64,880

Struck/Injured By Fellow Worker

12 $10,392 Struck or Injury By, NOC

4 $61,175

All Others 194 $555,164 All Others 219 $353,892

Total 290 $855,884 Total 290 $855,884

Lag Time Analysis Lag time is an important indicator in controlling workers’ compensation expenses. The City has chosen to utilize a measure of lag time which measures the difference between the date a claim is reported to Sedgwick and the date the incident is reported to the City. The City’s goal for lag time is 2days or less. The FY11 average lag time for the entire City was 4.30 days. Statistic shows that the sooner a claim is reported and claims management is initiated, the better chance the city has to control the total cost of the claim. For FY11, the Police Department experience 38 indemnity claims with an average lag time of 2.58 days; 22 medical claims with an average lag time of 1.64 days; and 96 incidents only with an average lag time of 2.48 days. The overall average lag time for all incidents and claims was 2.38 days. By comparison, for FY10, the City-wide average lag time was 8.66 days. Police experienced 41 indemnity claims with an average lag time of 51.34 days; 119 medical claims with an average lag time of 9.85 days; and 90 incidents only with an average lag time of 2.81 days. The chart on the following page displays the distribution of claims lag time reporting for Police in FY11. It can be seen on the chart that the largest number of claims are reported with 3 days. Within 3 days over 80% of all claims had been recorded. To improve its lag time statistic, Police needs to concentrate on the “outliers”, i.e. those claims requiring 10 or more days for reporting. While there may be legitimate reasons why a claim is not promptly reported, a large number of outliers may indicate a deficiency in the reporting process being used within the department.

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0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

0

20

40

60

80

100

120

140N

u

m

b

e

r

o

f

C

l

a

i

m

s

Number of Lag Days

Claims Lag Reporting FY 2011- Police

# Claims Total Cumulative %

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Public Works The Department of Public Works exists to sustain and improve the physical and environmental quality of the City for the benefit of its citizens. To this end, we plan for, acquire, build and maintain public infrastructure; manage the automotive fleet; manage residential solid waste; and provide mosquito control services. Public Works is one of the larger operational departments in the city. The department consists of three major divisions and fourteen sub-divisions. These divisions are: Operations Support Administration; Operations Engineering; and City Engineer. The sub-divisions of Operations and Support are: Administration; Contracts; Real Estate; Storm-water Customer Office; Waste Management Division; and Automotive Services. The sub-divisions of Operations Engineering are: Operations Management; Highway Divisions; and Building Maintenance. The sub-divisions of City Engineering are: Engineering Services Division; Traffic Engineering Division; Transportation Management Division; Surface Water Resources Division; and Facilities Design and Construction. Together these divisions account for over 870 FTEs as specified in the 2011 budget. The probability of experiencing incidents increases in direct proportion to the number of people involved (exposed). Also the type of work performed by a number of these divisions exposes the employees to a large number of risks. In the Public Works Department, it is difficult to manage risks because critical activities such as road maintenance cannot be avoided. At the close of FY11, the department had a total of 53 open claims (40 indemnity claims and 13 medical) with paid expenses of $2,503,298 ($2,498,831 indemnity and $4,467 medical) an incurred cost of $3,739,332 ($3,711,745 in indemnity claims and $27,586 in medical claims).

By way of comparison, the department experienced a total of 126 claims in FY10, with a total paid of $214,701 and an incurred amount of $2,166,488 compared to 122 claims in FY09, with a total paid of $164,438 and an incurred cost of $345,236. While the number of claims has increased, both paid and incurred have decreased slightly. However, both are likely to increase as these claims mature.



Cause Lifting Claims = 19 Expected Total Loss = $44,920

Struck/Injured by Hand Tool Claims = 4 Expected Total Loss = $165,920

Nature/Result Contusion (bruise, Skin Su Claims = 48 Expected Total Loss = $25,412

Fracture Claims = 3 Expected Total Loss = $165,917

Part/Target Finger(s) Claims = 19 Expected Total Loss = $7,304

Leg, Multiple Claims = 7 Expected Total Loss = $173,172

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Expected Total Cost


Expected Total Cost

Lifting 19 $44,920 Struck/Injured By Hand Tool

4 $165,920

Struck/Injured By Animal or In

12 $3,826 Lifting 19 $44,920

Struck/Injured By Object Being

10 $5,494 Pushing or Pulling

9 $21,472

Pushing or Pulling 9 $21,472 Overexertion 7 $14,960

Overexertion 7 $14,960 Trip 1 $7,608


Total 156 $315,893 156 $315,893

Lag Time Analysis Lag time is an important indicator in controlling workers’ compensation expenses. The City has chosen to utilize a measure of lag time which measures the difference between the date a claim is reported to Sedgwick and the date the incident is reported to the City. The City’s goal for lag time is 2 days or less. The FY11 average lag time for the entire City was 4.30 days. Statistic shows that the sooner a claim is reported and claims management is initiated, the better chance the city has to control the total cost of the claim. For FY11, the Public Works Department experience 13 indemnity claims with an average lag time of 3.15 days; 13 medical claims with an average lag time of 4.62 days; and 42 incidents only with an average lag time of 7.98 days. The overall average lag time for all incidents and claims was 6.41 days. By comparison, for FY10, the City-wide average lag time was 8.66 days. Public Works experienced 37 indemnity claims with an average lag time of 27.41 days; 97 medical claims with an average lag time of 8.15 days; and 25 incidents only with an average lag time of 7.44 days. The chart below displays the distribution of claims lag time reporting for Public Works in FY11. It can be seen on the chart that the largest number of claims are reported with 3 days. Within 12 days over 80% of all claims had been recorded. To improve its lag time statistic, Public Works needs to concentrate on the “outliers”, i.e. those claims requiring 15 or more days for reporting. While there may be legitimate reasons why a claim is not promptly reported, a large number of outliers may indicate a deficiency in the reporting process being used within the department .

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0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

0

5

10

15

20

25

30

% o

f C

laim

s R

ep

ort

ed

Nu

mb

er

of

Cla

ims

Number of Lag Days

Claims Lag Reporting FY10 - Public Works

No Claims % Total

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Fire The Virginia Beach Fire Department is a metropolitan sized organization that provides an all-hazard response that includes: Fire Suppression, Emergency Management, Hazardous Materials, Technical Rescue, Marine, Fire Inspections, Fire Investigations, Life Safety Education, Fire Training, Safety, Health and Wellness and disaster response from Virginia Task Force 2, FEMA Urban Search and Rescue Team. In addition, the department is a member of the Virginia Beach Emergency Response System and provides emergency medical technicians and paramedics to assist the Department of Emergency Medical Services with providing Advanced Life Support response to the community. The Virginia Beach Fire Department has established itself as a local, regional, state and national leader in numerous areas and continues to strive for excellence in delivering services to the city.

The Fire Department is one of four departments involved in providing for public safety. Public safety activities are inherently high risk and involve the potential for financial loss. The department consists of four major divisions; Administration; Personnel and Development; Office of Emergency Management; and Operations. Together these divisions account for over 460 FTEs as specified in the 2011 budget. The risks involved in providing for public safety are inherently high.

At the close of FY11, the department had a total of 44 open claims (41 indemnity claims and 3 medical) with paid expenses of $3,132,596 ($3,131,751 indemnity and $845 medical) an incurred cost of $6,941,107 ($6,932,087 in indemnity claims and $9,020 in medical claims).

By way of comparison, the department experienced a total of 63 claims in FY10, with a total paid of $193,917 and an incurred amount of $354,953 compared to 74 claims in FY09, with a total paid of $56,685 and an incurred cost of $196,042. While the number of claims has decreased slightly, both paid and incurred have increased and are likely to go even higher as these claims mature.



Cause Lifting Claims = 13 Incurred = $62,042

Twisting Claims = 3 Incurred = $92,973

Nature/Result Strain Claims = 36 Incurred = $99,135

Strain Claims = 36 Incurred = $99,135

Part/Target Low Back Area Claims = 12 Incurred = $2,475

Shoulder (s) Claims = 8 Incurred = $150,291

40




Expected Total Cost


Expected Total Cost

Pushing or Pulling 8 $3,007 Bodily Reaction 4 $54,864

Lifting 7 $16,534 Overexertion 6 $30,244

Overexertion 6 $30,244 Reaching 3 $26,374

Struck/Injured By Object

4 $7,222 Collision with Another Vehicle

4 $24,432

Bodily Reaction 4 $54,864 Heart Attack/Condition

1 $23,385


Total 77 $242,665 77 $242,665

Lag Time Analysis Lag time is an important indicator in controlling workers’ compensation expenses. The City has chosen to utilize a measure of lag time which measures the difference between the date a claim is reported to Sedgwick and the date the incident is reported to the City. The City’s goal for lag time is 2 days or less. The FY11 average lag time for the entire City was 4.30 days. Statistic shows that the sooner a claim is reported and claims management is initiated, the better chance the city has to control the total cost of the claim. For FY11, the Fire Department experience 15 indemnity claims with an average lag time of 8.00 days; 3 medical claims with an average lag time of 0.33 days; and 11 incidents only with an average lag time of 0.64 days. The overall average lag time for all incidents and claims was 4.41 days. By comparison, for FY10, the City-wide average lag time was 8.66 days. Fire experienced 19 indemnity claims with an average lag time of 2.26 days; 44 medical claims with an average lag time of 1.45 days; and 41 incidents only with an average lag time of 1.15 days. The chart below displays the distribution of claims lag time reporting for Fire in FY11. It can be seen on the chart that the largest number of claims are reported with 3 days. Within 3 days over 80% of all claims had been recorded. To improve its lag time statistic, Fire needs to concentrate on the “outliers”, i.e. those claims requiring 15 or more days for reporting. While there may be legitimate reasons why a claim is not promptly reported, a large number of outliers may indicate a deficiency in the reporting process being used within the department

41

75.00%

80.00%

85.00%

90.00%

95.00%

100.00%

105.00%

0

5

10

15

20

25

30N

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Number of Lag Days

Claims Lag Reporting FY 2011- Fire


42

Sheriff’s Office The Sheriff Office’s primary responsibility is to be the custodian of the city jail and to serve as the process server and bailiff for the local courts. The Sheriff’s Department is one of four departments involved in providing public safety. Public safety activities are inherently high risk and involve the potential for financial loss. The department consists of two major divisions; Community Services and Correctional Services. Together these divisions account for over 520 FTEs as specified in the 2011 budget. The risks involved in providing for public safety are inherently high.

At the close of FY11, the department had a total of 37 open claims (31 indemnity claims and 6 medical) with paid expenses of $2,266,919 ($2,220,520 indemnity and $46,398 medical) an incurred cost of $3,609,557 ($3,554,752 in indemnity claims and $54,805 in medical claims).

By way of comparison, the department experienced a total of 68 claims in FY10, with a total paid of $56,993 and an incurred amount of $81,834 compared to 73 claims in FY09, with a total paid of $43,458 and an incurred cost of $65,824. While the number of claims has decreased slightly, both paid and incurred have increased and are likely to go even higher as these claims mature.



Cause Running and Training Claims = 31 Expected Total Loss = $58,397

Struck/Injured By Motor Vehicle Claims = 1 Expected Total Loss = $60,949

Nature/Result Contusion (Bruise, Skin Sur Claims = 60 Expected Total Loss = $33,544

Sprain Claims = 22 Expected Total Loss = $83,993

Part/Target Finger(s) Claims = 23 Expected Total Loss = $17,975

Multiple Body Parts Claims = 3 Expected Total Loss = $61,545

43




Expected Total Cost


Expected Total Cost

Running and Training

31 $58,397 Struck/Injured By Motor Vehicle

1 $60,949

Altercation 29 $20,906 Running and Training

31 $58,397


6 $260 Lifting 2 $26,200


6 $2,351 Altercation 29 $20,906

Struck or Injury By, NOC

5 $3,265 Struck/Injured By Hand Tool

2 $13,708


Total 131 $209,540 131 $209,540

Lag Time Analysis Lag time is an important indicator in controlling workers’ compensation expenses. The City has chosen to utilize a measure of lag time which measures the difference between the date a claim is reported to Sedgwick and the date the incident is reported to the City. The City’s goal for lag time is 2 days or less. The FY11 average lag time for the entire City was 4.30 days. Statistic shows that the sooner a claim is reported and claims management is initiated, the better chance the city has to control the total cost of the claim. For FY11, the Sheriff’s Department experience 13 indemnity claims with an average lag time of 4.62 days; 4 medical claims with an average lag time of 1.00 days; and 73 incidents only with an average lag time of 7.44 days. The overall average lag time for all incidents and claims was 6.74 days. By comparison, for FY10, the City-wide average lag time was 8.66 days. The Sheriff’s Department experienced 14 indemnity claims with an average lag time of 2.00 days; 55 medical claims with an average lag time of 8.38 days; and 72 incidents only with an average lag time of 1.71 days. The chart below displays the distribution of claims lag time reporting for the Sheriff’s Department in FY11. It can be seen on the chart that the largest number of claims are reported with 3 days. Within 3 days over 80% of all claims had been recorded. To improve its lag time statistic, the Sheriff’s Department needs to concentrate on the “outliers”, i.e. those claims requiring 15 or more days for reporting. While there may be legitimate reasons why a claim is not promptly reported, a large number of outliers may indicate a deficiency in the reporting process being used within the department

44

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

0

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20

30

40

50

60

70

80N

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Number of Lag Days

Claims Lag Reporting FY 2011- Sheriff's Department


45

Human Services The Human Services Department is responsible for aiding citizens in meeting their fundamental needs during times of temporary economic and social crisis, to protect our children and vulnerable adults from abuse and neglect, to administer a range of services to help maintain families in the least restrictive and intrusive manner possible, and to assist in preparing citizens to find and retain employment. The department consists of eight major divisions; Mental Health and Substance Abuse; Financial Assistance; Quality assurance; Adult and Family Services; Juvenile Detention Center; Central Administration; Development Services; and Pendleton Child Services Center. Together these divisions account for over 1050 FTEs as specified in the 2011 budget. The probability of experiencing incidents increases in direct proportion to the number of people involved (exposed). At the close of FY11, the department had a total of 25 open claims (17 indemnity claims and 8 medical) with paid expenses of $44,405 ($41,653 indemnity and $2,752 medical) and an incurred cost of $154,448 ($143,623 in indemnity claims and $10,825 in medical claims). By way of comparison, the department experienced a total of 64 claims in FY10, with a total paid of $59,704 and an incurred amount of $106,468 compared to 54 claims in FY09, with a total paid of $84,608 and an incurred cost of $232,223. The number of claims has increased, while both paid and incurred have decreased but are likely to go even higher as these claims mature.



Cause Absorption, Ingestion, Inhalation Claims = 83 Expected Total Loss = $6,186

Fall On the Same Level Claims = 6 Expected Total Loss = $91,248

Nature/Result Contusion Claims = 38 Expected Total Loss = $55,987

Sprain Claims = 13 Expected Total Cost = $70,177

Part/Target Back Claims = 13 Expected Total Loss = $10,043

Leg Claims = 2 Expected Total Loss = $41,274

46




Expected Total Cost


Expected Total Cost

Absorption, Ingestion, or Inhalation

8 $6,186 Fall On the Same Level

6 $91,248

Collision with Another Vehicle

7 $20,023 Holding or Carrying

2 $24,092

Fall on the Same Level

6 $91,248 Collision with Another Vehicle

7 $20,023


6 $7,437 Struck/Injured By Falling

5 $9,292

Fall/Slip on Stairs 5 $182 Struck/Injured By Fellow Worker

6 $7,437


Total 90 $184,080 90 $184,080

Lag Time Analysis Lag time is an important indicator in controlling workers’ compensation expenses. The City has chosen to utilize a measure of lag time which measures the difference between the date a claim is reported to Sedgwick and the date the incident is reported to the City. The City’s goal for lag time is 2 days or less. The FY11 average lag time for the entire City was 4.30 days. Statistic shows that the sooner a claim is reported and claims management is initiated, the better chance the city has to control the total cost of the claim. For FY11, Human Services experience 17 indemnity claims with an average lag time of 9.88 days; 8 medical claims with an average lag time of 1.75 days; and 28 incidents only with an average lag time of 3.18 days. The overall average lag time for all incidents and claims was 7.53 days. By comparison, for FY10, the City-wide average lag time was 8.66 days. Human Services experienced 19 indemnity claims with an average lag time of 6.26 days; 45 medical claims with an average lag time of 9.69 days; and 25 incidents only with an average lag time of 4.60 days. The chart below displays the distribution of claims lag time reporting for Human Services in FY11. It can be seen on the chart that the largest number of claims are reported within 3 days. Within 6 days over 80% of all claims had been recorded. To improve its lag time statistic, Human Services needs to concentrate on the “outliers”, i.e. those claims requiring 15 or more days for reporting. While there may be legitimate

47

reasons why a claim is not promptly reported, a large number of outliers may indicate a deficiency in the reporting process being used within the department.

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

0

5

10

15

20

25

30

35

40

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4-6

7-9

10

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13

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16

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19

-21

22

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25

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31

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Number of Lag Days

Claims Lag Reporting FY11 - Human Services

No Claims % Total

48

Parks and Recreation

The mission of the Parks and Recreation Department is to deliver parks, recreation programs and public spaces that reflect the priorities of the community; to support tiered levels of service that recognize the diverse needs of the community; and to focus on sustainability of core programs, services and facilities through efficient and effective business practices. Parks and Recreation Department is one of the larger operational departments in the city. The department consists of eight divisions: Director’s Office; Business Systems; Human Resources; Golf Administration; Landscape Management; Planning, Design, and Development; Programming and Operations; and Resource Development. Together these divisions account for over 850 FTEs as specified in the 2011 budget. The probability of experiencing incidents increases in direct proportion to the number of people involved (exposed). Also the type of work performed by a number of these divisions exposes the employees to a large number of risks. It is difficult to manage the risks in Parks and Recreation’s activities because of the scope involved. The footprint of the City included government property, parks, and right-of-ways making it one of the largest landowners in the jurisdiction.

At the close of FY11, the department had a total of 40 open claims (27 indemnity claims and 13 medical) with paid expenses of $1,693,248 ($1,687,997 indemnity and $5,251 medical) an incurred cost of $2,897,355 ($2,873,534 in indemnity claims and $23,821 in medical claims).

By way of comparison, the department experienced a total of 142 claims in FY10, with a total paid of $162,605 and an incurred amount of $225,761 compared to 147 claims in FY09, with a total paid of $121,710 and an incurred cost of $222,082. While the number of claims has decreased slightly, both paid and incurred have likewise increased and are likely to go even higher as these claims mature.



Cause Struck/Injured By Animal or Insect Claims = 15 Expected Total Loss = $4,861

Struck/Injured By Falling Claims = 10 Expected Total Loss = $23,243

Nature/Result Contusion (Bruise, Skin Sur Claims = 92 Expected Total Loss = $76,845

Contusion (Bruise, Skin Sur Claims = 92 Expected Total Loss = $76,845

Part/Target Back (All Others) Claims = 25 Expected Total Loss = $92,842

Back (All Other) Claims = 25 Expected Total Loss = $29,842

49




Expected Total Cost


Expected Total Cost

Struck/Injured By Animal or Insect

15 $4,861 Struck/Injured By Falling

10 $23,243


15 $17,992 Struck/Injured By Object Being

15 $17,992

Lifting 15 $14,235 Lifting 15 $14,235

Bitten 10 $1,018 Bending 3 $12,218

Struck/Injured By Plant

10 $2,555 Caught In/Between-Collapsing

2 $12,155


Total 205 $161,375 205 $161,375

Lag Time Analysis Lag time is an important indicator in controlling workers’ compensation expenses. The City has chosen to utilize a measure of lag time which measures the difference between the date a claim is reported to Sedgwick and the date the incident is reported to the City. The City’s goal for lag time is 2days or less. The FY11 average lag time for the entire City was 4.30 days. Statistic shows that the sooner a claim is reported and claims management is initiated, the better chance the city has to control the total cost of the claim. For FY11, Parks and Recreation experience 16 indemnity claims with an average lag time of 4.25 days; 13 medical claims with an average lag time of 3.00 days; and 62 incidents only with an average lag time of 3.77 days. The overall average lag time for all incidents and claims was 3.75 days. By comparison, for FY10, the City-wide average lag time was 8.66 days. Parks and Recreation experienced 32 indemnity claims with an average lag time of 9.06 days; 120 medical claims with an average lag time of 9.24 days; and 69 incidents only with an average lag time of 8.26 days. The chart below displays the distribution of claims lag time reporting for Parks and Recreation in FY11. It can be seen on the chart that the largest number of claims are reported with 3 days. Within 10 days over 80% of all claims had been recorded. To improve its lag time statistic, Parks and Recreation needs to concentrate on the “outliers”, i.e. those claims requiring 15 or more days for reporting. While there may be legitimate reasons why a claim is not promptly reported, a large number of outliers may indicate a deficiency in the reporting process being used within the department.

50

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

0

10

20

30

40

50

60

700-3

4-6

7-9

10

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13

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16

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19

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31

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34

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37

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Number of Lag Days

Claims Lag Reporting FY11 - Parks and Recreation

No Claims % Total

51

The Department of Public Utilities experienced an extremely low frequency (3.84%) and an extremely low severity (2.72%) based on a department of its size and the nature of work done by the department and the types of risks its employees are subject too. Public Utilities

The Department of Public Utilities provides water and sanitary sewer services to Virginia Beach citizens. The department consists of four major divisions; Business; Engineering; Operations; and Special Projects. Together these divisions account for over 412 FTEs as specified in the 2011 budget.

At the close of FY11, the department had a total of 10 open claims (6 indemnity claims and 4 medical) with paid expenses of $24,387 ($21,233 indemnity and $3,154 medical) an incurred cost of $46,631 ($35,966 in indemnity claims and $10,665 in medical claims).

By way of comparison, the department experienced a total of 44 claims in FY10, with a total paid of $41,627 and an incurred amount of $60,507 compared to 35 claims in FY09, with a total paid of $43,011 and an incurred cost of $69,336. While the number of claims has increased, both paid and incurred have decreased slightly, but are likely to increase as these claims mature.



Cause Pushing or Pulling Claims = 5 Expected Total Loss = $4,052

Bending Claims = 1 Expected Total Loss = $22,064

Nature/Result Contusion Claims = 13 Expected Total Loss = $12,067

Sprain Claims = 11 Expected Total Loss = $39,640

Part/Target Shoulder(s) Claims = 7 Expected Total Loss = $17,199

Low Back Area Claims = 2 Expected Total Loss = $22,331

52




Expected Total Cost


Expected Total Cost

Pushing or Pulling 5 $4,052 Bending 1 $22,064

Lifting 5 $16,872 Lifting 5 $16,872



Expected Total Cost


Expected Total Cost

Fall/Slip on Ice or Snow

4 $1,128 Strike Against/Step On Station

1 $4,375

Caught In, Under or Between

3 $567 Pushing or Pulling

5 $4,052

Fall/Slip From a Different Level

3 $4,027 Fall/Slip From a Different Level

3 $4,027


Total 43 $64,883 43 $64,883

Lag Time Analysis Lag time is an important indicator in controlling workers’ compensation expenses. The City has chosen to utilize a measure of lag time which measures the difference between the date a claim is reported to Sedgwick and the date the incident is reported to the City. The City’s goal for lag time is 2days or less. The FY11 average lag time for the entire City was 4.30 days. Statistic shows that the sooner a claim is reported and claims management is initiated, the better chance the city has to control the total cost of the claim. For FY11, Public Utilities experienced 6 indemnity claims with an average lag time of 9.67 days; 4 medical claims with an average lag time of 10.25 days; and 11 incidents only with an average lag time of 9.18 days. The overall average lag time for all incidents and claims was 9.52 days. By comparison, for FY10, the City-wide average lag time was 8.66 days. Public Utilities experienced 11 indemnity claims with an average lag time of 21.09 days; 34 medical claims with an average lag time of 8.44 days; and 5 incidents only with an average lag time of 12.00 days. The chart below displays the distribution of claims lag time reporting for Public Utilities in FY11. It can be seen on the chart that the largest number of claims are reported with 6 days. Within 9 days over 80% of all claims had been recorded. To improve its lag time statistic, Public Utilities needs to concentrate on the “outliers”, i.e. those claims requiring 15 or more days for reporting. While there may be legitimate reasons why a claim is not

53

promptly reported, a large number of outliers may indicate a deficiency in the reporting process being used within the department.

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20.00%

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120.00%

012345678

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4-6

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-12

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19

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22

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Number of Lag Days

Claims Lag Reporting FY11 - Public Utilities

No Claims % Total

54


55

Significant Activities

Among the significant activities that Risk Management engaged in for 2011 are the following:

Actuarial Analysis

The City contracted with Oliver Wyman to produce an Actuarial Study of

the Risk Management Function as of June 30th.

Key elements of this document include:

o Estimates of net retained unpaid losses and Allocated Loss Adjustment Expense (ALAE), including amounts for Incurred But Not reported (IBNR) claims.

o Prospective year loss projections for the next five fiscal years, 2011/12 through 2015/16, for workers’ compensation, automobile and general liability.

o Cash Flow projections of expected payments for budgeting purposes.

Changes in the City’s Risk Management Internal Service Fund, Total Net Assets from Fiscal Year 06 to 11.

As of June 30, 2011, Deficit Total Net assets-Ending was ($10,807,857) compared to ($18,327,228) for 2010, a net 41.1% decrease in deficit. In the Supporting Data Section Table VI details the net assets ending balances for the past six years.

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

$20,000,000

2006 2007 2008 2009 2010 2011 2012Estimate

Deficit in Total Net Assests-Ending

56

Collaborative Efforts achieved:

Working with the City Attorney’s Office, Occupational Health and Safety, Payroll and others

o Revision of the Workers’ Compensation workflow process o Development of the Disability Retirement Steering Committee Work

Plan for 2010-11 o Drafted guidelines for making workers’ compensation settlements o Advanced the Return-To-Work Program which will be discussed in the

Return-To-Work Section.

Disability Steering Committee – The Disability Steering Committee continued its work to improve accountability at all levels for job-related disability retirements in the City. The committee meets regularly on a monthly basis to consider all aspects of disability related retirement issues.

Collaborative efforts are ongoing as opportunities for cost savings and process improvements can be implemented. As an example of these efforts, the Disability Steering Committee has begun a study of disability related retirements. The committee will continue its analysis of disability retirements in an effort to improve on the number of disability related retirements.

TPA Cost Containment Efforts

Working with the City’s TPA, Risk Management implemented procedures to begin a medical cost containment effort. To date there have been some significant savings achieved. A medical bill review process has resulted in the following savings (excluding pharmacy payments):

Total

Number of Bills 6,272

Total Provider Charges $4,110,730

Total Savings $1,146,359

Total Fees $288,660

Net Savings $857,699

Gross % of Savings * 28.00%

Net % of Savings 20.86%

Average Net Savings per Bill $136.75

The average for this geographical area is 22-28%

A summary of savings including pharmacy for various provider types is shown in the table below.

Description Savings % of Total Savings

Preferred Provider Organization $825,772 72.00%

Provider Charges Reduction (Difference

between originally charged amount and Fee Schedule rate)

$283,131 24.69%

Pharmacy Network $61,348 5.08%

Out of Network Negotiated Savings $37,456 3.27%

Grand Total $1,207,707 100.00%

57

Medical bill review turnaround resulted in the following statistics for the current contract year thru June 30, 2011:

Overall turnaround time – 13 days

Percent paid under 21 days – 91%

Percent paid beyond 21 days – 9%

The graph below represents the savings by type.

$825,772

$283,131

$61,348 $37,456

Cost Containment Savings

PPO PCR Pharmacy Network Out of Network Negotiated

58


59

Return-To-Work Program

The Return-to-Work Program is a team approach to managing disability within our City

departments. It is a collaborative program that is managed by Human

Resources/Occupational Safety and Health and Finance/Risk Management and

involves an entire team of stakeholders and advisors that are committed to ensuring the

success of the program. There is a full-time registered nurse assigned to the program

as the Return-to-Work Coordinator. It assists in cost reduction and is a benefit to our

injured/ill members. It is an innovative process that ensures our injured/ill members are

provided the best medical services possible. The program shows our members that

they are valued and involves them in the recovery process. The Return-to-Work

Program assists all members with either job related or personal illness/disability

concerns.

There are several goals of the Return-to-Work Program. Our first and primary goal is to

retain our valued, experienced members. Our second goal is to work with providers to

provide enhanced benefits and exceptional medical treatment to our injured/ill

members. Our third goal is to ensure safe, timely return of our injured/ill members to

the workforce. Finally, to reduce the costs related to disability both directly and

indirectly.

Key components of the Return-to-Work Program include promoting a change in how we

perceive individuals who have a temporary or permanent impairment and are able to

continue to be productive members of the workforce. It also includes training, both in

person and by video, for supervisors and members about the program and how to

proactively respond to injuries and/or illness. The training is provided by the Return-to-

Work Coordinator and the Workers Compensation Adjuster who play an integral role in

the program. The Coordinator communicates with the treating physicians and provides

them with all the information necessary to return the member back to work. They also

maintain continuous communication between the injured/ill member, the physician and

the supervisor to preserve a good working relationship and attempt to avoid any

potentially negative implications. The Coordinator also assists in finding transitional

employment that is appropriate for the member’s abilities. Medical research has shown

that people recover more quickly if they remain active and return to their normal routine

as soon as possible, thereby limiting isolation and allowing continuous employer and

employee connectivity. As participants in the Return-to-Work Program, members

become an active part of the recovery process.

60

Several committees work in conjunction with the Return-to-Work Program, Disability Retirements and Safety Issues. The Disability Steering Committee has developed a work plan through 2011 to address key issues surrounding disability management. The Committee has identified a number of disability retirement issues.

The DIPCOM Committee meets bi-monthly to discuss relevant issues with representatives from key Departments. The Central Safety and Health Committee has been established and meets monthly to discuss safety and health related issues. This committee is responsible for the development of safety and health plans for each department, the completion of the JSA (Job Safety Analysis) for each job within the City, as well as other related OSHA issues. Necessary corrective actions are identified and recommended for improvement of safety performance.

Since its formal inception on January 1, 2008, the Return-to-Work Program has assisted

over 150 employees. The RTW Coordinator also completed over 125 onsite visits with

physicians/worksite evaluations during FY2011. The program has been successful in

assisting departments in finding reasonable accommodations for employees with

permanent impairments from on-the-job injuries, as well as finding permanent alternate

jobs for those individuals who were unable to continue in their original position. The

program has also successfully placed employees with temporary restrictions in alternate

locations within the City when their employing department was unable to provide light

duty. This facilitates a reduction in the number of lost time days for workers’

compensation claims.

Lost Time Analysis

It is the Policy of the city to provide compensation and leave to employees who have

sustained a job-related injury or illness. These employees are unable to perform

essential job functions. Employees covered under this policy are placed in a “Lost Time”

status. The employee continues to be paid while unable to work. The volume of lost

time continues to be an issue for the city. An analysis of injury leave status for FY11

shows that the city incurred a total of 20,866.49 hours of injury leave. The cost for these

lost hours was $410,010.68. The Table below details how the injury leave hours and

costs were distributed over the various departments.

Department YTD Hours YTD Cost

Police 5,745.50 $138,058.93

Fire 3,944.90 $103,578.60

Parks and Recreation 3,213.00 $ 42,466.33

Public Works 2,283.25 $ 39,182.66

Human Services 1,212.50 $ 17,160.80

Sheriff’s Department 1,077.75 $ 19,667.56

All Others 3,389.59 $ 49,895.80

Total 20,866.49 $410,010.68

61

The chart below shows the distribution of lost time cost by department.

Much of the success of the Return-to-Work Program is contributed to the ongoing

collaboration that occurs between HR/Occupational Safety and Health, HR/Staffing and

Compensation, HR/Employee Relations, HR/EEO and ADA Advisor, City Attorney’s

Office and Finance/Risk Management. In addition, this collaboration has assisted in

identifying several policies that required modification in order to ensure success of the

program, including the Injury Leave Policy, the Temporary Limited Duty Policy and the

Separation/Administrative Termination Policy.

The chart on the next page outlines the steps for both job-related and non-job-related

workers’ compensation processing.

27.5%

18.9%

15.4%

10.9%

5.8%

5.2%

16.3%

% Lost Time Cost

Police Fire Parks & Rec Public Works Human Services Sheriff All Others

62

Collaborative Worker’s Compensation and Non Job-Related Process Revision Date: 7/8/2009N

on

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Non Job-related injury

occurs

Employee treated

by Personal MD

(PCP); duty status

is determined

Lost Time occurs,

employee uses

personal leave

Employee

improves & PCP

recommends

limited duty

Employee brings

doctor’s note to

OHS

OHS verifies or

clarifies work

limitations for

management:

using Nursing

Intervention

process

Appropriate limited

duty is assigned

Supervisor

assigns duties

without

verification

New Job-related

injury causes

personal

condition to

worsen

Employee recovers and

returns to full

Employee’s

Disability is rated

Written recommendations for

follow-up &/0r change of duty

status are provided to employee

and supervisor

OHS, Employee Relations, ADA

Coordinator & Legal assess case for

needed action, i.e. placement and

notify employee and Supervisor of

outcome

Options letter is issued after 90 days

of limited duty. Employee is given 90

days to take action before

Administrative Termination

Employee action

determines outcome

Injury occurs: Supervisor

offers Panel and

Authorization for Treatment

Forms

Serious cases

reported directly

to Safety

Employee treated

by Panel MD and

duty status is

determined, injury

leave begins

Employee

improves & panel

MD recommends

limited duty

Employee brings

doctor’s note to

OHS

OHS verifies or

clarifies work

limitations for

management

Supervisor

assigns duties

without

verification

High Risk for

extension of

injury

Supervisor sends

employee home:

“no limited duty”

Unnecessary lost

productivity and

wages

Reports sent

using Web-based

On-line system or

telephone

MD Reports go

directly to TPA

Lost Time

occurs, employee

uses personal

leave

Compensability Decision

made by City and TPA

Employee is

notified of claim

status

Team Meeting Risk

Management & OHS

determine need for

alternate medical

opinion

Provider’s

recommendations

are not compatible

with essential job

functions

Case is continually

assessed by RTW

Nurse and

reviewed for

Options letter

OHS, Employee Relations,

ADA coordinator & Legal

assess case for needed action,

i.e. placement and notify

employee and Supervisor of

outcome

Employee action

determines

outcome

RTW Nurse facilitates

communication

between employee and

panel MD using

PR&WC form

RTW Nurse

receives first

report of

accident by

OHS accesses

TPA’s Medical

Files as needed

Health-

Legal-Risk

meet every

other

Thursday

Risk and Safety

Collaborate on

corrective action, w or

w/o work site

inspection

Risk, Safety & Dept Team

develops prevention

strategy w/ training & site

improvement

Risk, Safety &

Dept Team

follows up to

ensure strategy

is effective

Employee contacts

Payroll to apply for

work-related

Disability

Process Improvement is

applied at other sites

Employee is

assisted with

preparation of

Retirement Packet

by Payroll or OHS

Completed packet

goes to VRSTeam Meeting:

Risk-Health

reviews claim

Appeal Process

may be invoked,

Risk takes lead

Approved:

employee

leave

converted to

injury leave

PR&WC = Physical

Requirements and Working

Conditions

OHS notifies Risk

Management of

need for action

VRS sends

Pacet to

Medical

Board

Medical Board

approves Disability

Employee retires with

or without disability

Risk Management

arranges for an

independent medical

examination

IME report goes

to VRS with

application

63

Temporary Total and Temporary Partial disability payments continue to be significant for

the city. The chart below demonstrates some of the impact of these payments for the

last three fiscal years.

FY2008 FY2009 FY2010 FY2011

Number of Claims 127 119 118 112

Days Paid 16,658 16,534 15,159 19,189

Amount Paid $1,172,446 $1,058,659 $1,073,918 $1,185,830

While the number of claims has decline over the last three years, days paid and the

amount paid, which decreased have climbed again in FY2011.

Job-Related Disability Retirements

The Disability Steering Committee is considering a number of facts related to disability

retirements. These include:

The city’s annual VRS contribution is estimated to be $51.4 million in FY-2010. The annual VRS contribution rate is 16.48% of payroll. The VRS rate beginning July 1, 2012 is 20.68%.

According to a JLARC Study, Virginia Beach has the highest rate of job-related disability retirements in VRS, and the majority of such retirements are in the public safety (LEO) departments.

Job related disability retirees receive 66 2/3% of their salary tax free as their pension until death, as well as refund of contributions, health care, and enhanced life insurance.

35% of the City’s LEOs retirements were work-related disability retirements, the highest when compared to five other VRS-participating localities that share the same public safety structure as Virginia Beach: Chesapeake 28%; Chesterfield Co 8%; Henrico Co 9%; Portsmouth 0%; Roanoke Co 10%.

About 32% of Virginia Beach’s LEOs work-related disability retirements were heart related (heart-lung presumption).

68% of the LEO’s job-related disability retirements were for reasons such as ankle, shoulder, or other similar injury that made it difficult for them to meet stringent physical demands but could easily be placed in other less strenuous jobs. These retirees often find other work after retiring from the City and are often in good health despite the injury.

JLARC concludes that it may be possible for some people to effectively perform the vast majority of their job requirements even if they suffer a physically debilitating injury, and that localities should be allowed to establish managed disability programs.

The current standard for disability retirement under VRS is that the employee must be able to do the job for which they were hired. There is no requirement to accept or be trained for other positions.

64

According to actuarial data, between 27.8% and 33.5% of Virginia Beach retiree pension costs are for disability retirements. This compares to 5.5% for VaLORS, 12.5% for State Police, and 18.7% for Chesapeake. In effect, this disproportionate impact is costing the City an additional $2.5 million dollars annually to fund. These costs are expected to increase, and are unsustainable.

One solution is to amend State Code §51.1-156 Disability Retirement to

provide that VRS could deny a disability retirement to an employee who is

determined to be medically capable of performing an alternative position that

is available and at a comparable level and salary.

The charts below document retirement statistics for the past 15 fiscal years.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

0

50

100

150

200

250

FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 Fy05 FY06 FY07 FY08 FY09 FY10 FY11

Total Retirements All Departments

Job Related Disability Non-Job Related Disability

Service Retirements Total Retirements

Per Cent Job Related

65

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

0

5

10

15

20

25

30

35

40

45

FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY

Total Retirements - Police Department




0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

0

5

10

15

20

25

30

FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

Total Retirements - Fire Department




66


67

Future Direction

In the coming year, the Risk Management Division will be working on a number of

initiatives. Among these are:

GASB 10 - The Government Accounting Standards Board, through the issuance of

Statement No. 10 “Accounting and Financial Reporting for Risk Financing and Related

Insurance Issues” which became effective June 15, 1990, has established guidelines for

accounting and financial reporting of risk financing. In compliance with this statement

(GASB 10), an annual review of risk management fund activities is required and must

be completed annually in the form of an annual Actuarial Study and a plan to reduce

and eliminate the unfunded liability. The city is in compliance with this requirement. It

contracts with Oliver Wyman to review the risk management fund as of June 30th

annually to estimate unpaid losses and provide funding needs for budgeting purposes.

Workers’ Compensation Gap Analysis – An analysis was planned to identify and

mutually explore the root causes of the City of Virginia Beach’s workers’ compensation

costs. The scope of this project included conducting a workers’ compensation gap

analysis for departments to identify workers’ compensation cost drivers and

corresponding opportunities for cost reduction. This project is focused solely on the

safety and loss prevention practices of the specific departments and the claim

processes in place to manage claims.

The workers’ compensation gap analysis will be used to determine the level of workers’

compensation improvement opportunities within the City of Virginia Beach. Moreover,

the analysis tool will identify root causes of under-performance and lay the foundation

for prioritizing the systematic solutions to enhance processes.

The gap analysis consists of two primary components, financial analysis and process

analysis. Marsh will be assessing both process factors and outcome results from a pre-

loss (safety management) and post-loss (claim and disability management) perspective.

The financial component of the gap analysis uses Marsh’s Dimensions™ benchmarking

database to compare loss experience to a sample of peers with the same Standard

Industrial Classification (SIC). This provides a baseline for evaluating how the city

compares to its peers, which becomes critical information when establishing realistic

goals for future progress.

The process component compares current workers’ compensation management

practices to Marsh’s “World-Class” management practices to identify opportunities for

improvement. This creates a benchmark for the process components as well. This

section will assess processes to identify and prioritize potential gap solutions. The

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“World-Class” practices are organized into six categories that influence workers'

compensation loss costs:

1. Culture and Management Involvement

2. Safety and Prevention

3. Training and Education

4. Claim Management

5. Injury Management

6. Continuous Improvement

The gap analysis project will be conducted in four phases. The steps in the work plan will be:

o Divide the risk pool into phases:

o Phase I - Public Utilities, Public Works FY 09-10 o Phase II - Parks and Recreation FY 10-11

The Departments of Public Utilities and Public Works completed their gap analysis in FY11 and Parks and Recreation began it gap analysis this year.

Quarterly Reports - The Risk Management Division developed a reporting format of

departmental risk management activities and provided feedback to all city departments

on a quarterly basis. The object of providing these quarterly reports is to:

1. Encourage a mindset with all employees that begins with Departmental Directors that dollars saved in managing their risk allows dollars to be spent on other areas that are currently unfunded.

2. Provide management with useful reports, training and assistance that fosters reduction in dollars spent on risk and accountability at the departmental level.

The quarterly reports include:

1. Loss information from prior FY in order for Departmental Directors to monitor costs from one year to another.

2. Narrative information on how to reduce a trend that appears in their scope of operations working closely with Health and Safety, being mindful of the human factor.

The reports also included an Executive Summary that highlights significant data in an easy to understand format. In addition, reports are available electronically and eliminated paper copies being produced for the Deputy City Managers and the City Manager. For the first three quarters of FY11, the standard quarterly reports were produced. For the fourth quarter of FY11, the quarterly report consisted of a three year trend analysis of workers’ compensation claims. This data was presented to help

69

prepare the departments for a new risk cost allocation method to be implemented in the FY13 budget cycle. Outreach Efforts – Risk Management, in 2011, continued its outreach program to raise awareness of the costs of risk, specifically in the larger operating departments of the city. This effort involved formal presentations to a number of departments and other management groups. Among the groups presented were:

Parks and Recreation – approximately 10 participants

Police - approximately 50 participants

In addition, awareness presentations were given at the city-wide supervisor training sessions. . SCHIP Extension Act of 2007 - The Medicare, Medicaid, and SCHIP Extension Act of 2007 creates reporting requirements for TPAs, insurance carriers and other claims administrators with an effective date of July 1, 2009. The new requirements specify that:

The administrator must make a specific determination for each claimant under a workers’ compensation, liability or PIP (personal injury protection)/no-fault program as to whether the party is a Medicare beneficiary.

When a claimant is found to be a Medicare beneficiary, information regarding the claimant and claim must be reported to the Secretary of Health and Human Services (the Secretary) so that a determination can be made regarding coordination of benefits and applicable recoveries.

A penalty of $1,000 per claim day will be assessed against any applicable plan for cases of non-compliance, in addition to all other remedies (conditional payment recovery and damages) allowable under the law.

This action significantly escalates administrative requirements designed to protect the Medicare system from inheriting medical expenses considered to be the primary obligation of a group health plan, which under the Act includes insured and self-insured workers’ compensation, liability and no fault plans. This will increase the oversight responsibility of Risk Management. Reporting under this program began in January, 2010. Cost Allocation Model – The Risk Management Division developed an enhanced cost allocation model to allocate the costs associated with risk management administration to the City’s operating departments. The model is designed so that over time, the critical costs drivers can be identified to support a more equitable allocation of costs to all departments. The cost drivers currently being used are: claims account for 75% of the allocation; number of FTEs account for 6.25% of the allocation; payroll expense accounts for 6.25% of the allocation; number of vehicles account for 6.25% of the allocation; and vehicle cost account for 6.25% of the allocation. This allocation model has been employed for the FY13 budget cycle.

70

Software Update – The City currently relies on a number of sources to collect and analyze risk data. Sedgwick CMS, the City’s Third Party Administrator, manages the workers’ compensation program. Services provided by the TPA include claims investigation, establishing loss reserves, claims adjusting, and claims payment processing. Data is collected and maintained in Sedgwick’s proprietary data system. Reports are provided on a routine basis to the City.

Automobile and property-related liability loss data are maintained by the City in the RiskMaster® system.

The Risk Management Division conducted an analysis of the information systems currently utilized for risk-related data management. After a thorough review of the RiskMaster system and a review of other products on the market, the decision was made to upgrade to Version X7 of the RiskMaster system. The upgrade of RiskMaster was begun in FY11 and is expected to be completed in FY12. This will ensure that RiskMaster and TPA software interact with the most up-to-date capabilities, allows data to be used to make critical decisions as quickly as possible to identify trends, implements changes and supports City leadership.

A CIP project request was submitted to move the RiskMaster application and database from a City-owned server to a CSC hosted environment. Having the system hosted will provide a positive ROI for the City. By transferring the technical duties of maintaining the system, highly skilled technical resources will become available for other City projects, resulting in increased performance. The overall quality of the RISKMASTER X applications will be improved as maintenance and upgrades are performed more rapidly and routinely by highly experienced Data Center staff. Customer Service will be increased for all users as problems are resolved more quickly and new functionality provided more frequently. By letting CSC manage RISKMASTER X in a hosted environment, will ensure automatic security patching and performance monitoring 24x7x365, disaster recovery services, and other benefits that would be either impossible or cost prohibitive for the City to achieve alone. Enterprise Risk Management- Enterprise Risk Management (ERM) is defined by the Committee of Sponsoring Organizations (COSO) as “a process, affected by an entity’s board of directors, management and other personnel, applied in strategy-setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.” Enterprise risk management marries both operational and financial risk. It assesses historical patterns of losses in both areas, potentially to broaden the portfolio of risks. Traditionally, the focus of risk management has been on the risk encountered in the course of government operations to deliver services. The Risk Management Division has undertaken an effort to evaluate ERM for the purpose of examining the City’s complete portfolio of risks, considering how individual risks interrelate, and develop an appropriate risk mitigation approach to address risks in a manner that is consistent with the City’s long term strategy and overall risk appetite. Risk Management has established a relationship with the Business Recovery Association of Virginia (BRAV). BRAV is an independent professional

71

association located in Richmond, of those involved in Business Continuity/Recovery and Contingency Planning. This organization is in the forefront of ERM research in the Commonwealth of Virginia.

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73

Operational Benchmarking & Performance Management and Reporting

Benchmarking is defined as the act of comparing a measurement to a standard. It shows you where you are and helps you decide where you want to go. Benchmarking has become a popular tool for assessing the effectiveness of risk management programs. The Risk Management Division has chosen to utilize this industry practice to evaluate current performance in light of historical activity and to evaluate performance against other similar organizations. The challenge lies in obtaining reliable data and in using relevant benchmarks so that meaningful comparisons can be made over time.

The Risk and Insurance Management Society (RIMS) has been conducting benchmarking surveys for over two decades. The primary benchmark used by RIMS is the “Cost of Risk”. The cost of risk accounts for the total costs associated with an organization’s 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 Division has chosen to report the Cost of Risk in association with total FTEs and population served. The cost of risk per FTE provides an overview of the effectiveness of the risk management function. The cost of risk per 1,000-population gives an indication of the burden placed upon the City’s population to deal with the risks associated with providing government services. The table below summarizes the costs for the current fiscal year as well as the prior four fiscal years.

Analysis of Total Cost of Risk

FY FTEs Population (1000)

Total Risk Expenses

Cost per FTE Cost per 1,000 Pop

2005 6480 433.5 $ 9,570,601 $1,455 $22,078

2006 6831 431.8 $12,050,357 $1,764 $27,907

2007 6898 430.3 $12,975,468 $1,881 $30,154

2008 6881 431.5 $ 9,273,411 $1,328 $21,491

2009 6943 431.5 $10,754,492 $1,549 $24,924

2010 6946 447.8 $10,093,900 $1,453 $22,539

2011 5936 438.0 $10,053,353 $1,694 $22,953

The City’s total cost of risk for fiscal year 2011 was $10.1 million. This figure encompasses the year-end total expenditures for all of the Risk Management Division’s functions. Utilizing this figure, the Total Costs of Risk per FTE for 2011 was $1,694 and the total cost of risk per 1000 population was $22,953. It is important to note that cost per FTE has decreased by 3.97% since 2006 while the number of FTEs has decreased by 13.1%. The cost of risk per 1,000-population has decreased by 17.8% since 2006 while population has increased by 1.4%. The overall cost of risk has decreased by 16.6% since 2006 and has decreased by 0.4% over the last fiscal year. Overall, the City of Virginia Beach performed well comparing current performance to historical data.

The City continued to participate in a benchmarking study conducted by Sedgwick, the

City’s TPA. Benchmarking data was collected for other municipalities in Virginia. The

74

other cities in the survey consisted of City of Richmond, City of Norfolk, City of Danville,

and the City of Charlottesville.

The comparisons presented consists of an analysis of claim type, average incurred

payments, payment category, denial, litigation, subrogation, and presumption for FY11.

The results of this analysis are presented below.

Summary by Claim Type

Indemnity Claims

Medical Only Claims

Total

City of Virginia Beach

% Total Claims 37.19% 62.81% 100.00%

Average Incurred $6,386 $986 $2,994

Other Jurisdictions

% Total Claims 35.83% 64.17% 100.00%

Average Incurred $8,443 $1,105 $3,735

While the City has a slightly higher percentage of indemnity claims, its average incurred cost per claim is considerably lower than the rest of the group.

Average Incurred by Payment Category

Average Indemnity Incurred

Average Medical Incurred

Average Expense Incurred

Average Total Incurred

City of Virginia Beach $274 $2,341 $379 $2,994

Other Jurisdictions $514 $2,821 $399 $3,735

The City experienced a lower average incurred cost in all payment categories.

Payment Category as Percent of Total Incurred

City of Virginia Beach Other Jurisdictions

Percent Indemnity 9.16% 13.76%

Percent Medical 78.19% 75.56%

Percent Expense 12.66% 10.69%

The City experienced a slightly higher percent of payment for medical and expense categories.

75

Denial Status

Accepted Denied Total

City of Virginia Beach 89.87% 10.13% 100.00%

Other Jurisdiction 89.40% 10.60% 100.00%

The City experienced a slightly lower percent of denied claims.

Medical Payment Comparison 07/01/2009 – 06/30/2010 vs. 07/01/2010-06/30/2011

Payment Type 06/30/2010 % of Program 06/30/2011 % of Program

Physical Therapy $431.085 12.71% $535,564 15.99%

Doctor $701,696 20.69% $501,567 14.97%

Pharmacy $377,515 11.13% $437,805 13.07%

Medical Supplies $293,517 8.65% $258,388 7.71%

Hospital Outpatient $309,528 9.12% $243,085 7.26%

157 employees received an indemnity benefit for the period 07/01/2010-

06/30/211

Open Presumption Claims: There are 35 open presumption claims with a total

incurred of $12,268,832.40. These claims represent 32% of the entire program.

Lag Report: For new losses reported 07/01/2010 – 06/30/2011 the lag time,

defined as: Date Reported to Employer/Date Reported to Sedgwick = 4.3 days.

This is a significant improvement over FY10 Lag Time of 8.65 Days. The national

average lag time is 2.0 days.

The City also participated for the first time in a benchmarking study conducted by a

number of government entities in the Hampton Roads area. The results of this study are

detailed in Table VII in the Supplemental Data Section. The following metrics were used

to compare local entities:

Average Cost Per Claim – Total claim costs divided by the number of reported

claims. Virginia Beach ($2,877.90) reported a slightly higher cost per claim than

the average for the Hampton Roads ($2,281.64) area.

Annual Cost per FTE – Total claim cost divided by the number of Full-Time

Equivalent Employees. Virginia Beach ($418.41) reported a higher cost than the

average for the Hampton Roads ($354.95) area.

Frequency Rate (per 100 employees) – Total number of claims divided by the

total number of FTEs divided by 100. The lower the frequency rate, the better the

entity is performing. Virginia Beach (14.539) reported a lower frequency rate than

the average for the Hampton Roads (15.557) area.

Percentage of Open Claims – Total number of claims marked as open divided by

total number of claims reported. By quickly closing a claim, the potential for the

76

claim to escalate is cost is reduced. Virginia Beach (5.63) reported a lower

percentage than the average for the Hampton Roads (9.07) area.

Percentage of Annual Indemnity Claims – Total number of indemnity claims

reported divided by the total number of claims reported. Virginia Beach (16.67)

reported a higher percentage than the average for the Hampton Roads (7.95)

area.

Percentage of Litigated Claims – Total number of reported claims assigned to

legal counsel divided by total number of reported claims. Virginia Beach (0.249)

reported a lower percentage than the average for the Hampton Roads (1.314)

area.

WC Costs as Percentage of Payroll – Total incurred costs for WC claims divided

by total payroll expense multiplied by 100. Virginia Beach (1.1224) reported a

higher percentage than the average for the Hampton Roads (0.5928) area.

Additional Benchmarking Data

Benchmarking data can generally be categorized into one of three types of performance

measures: workload, efficiency, and effectiveness indicators. The following table

illustrates workers’ compensation performance measures used by some localities.

Workload

Number of workers’ comp claims processed

Number of employees with multiple workers’ comp claims in one year

Number of lost workdays

Efficiency

Average cost per claim

Average handling cost per claim

Percent of claims processed within 30 days

Effectiveness

Percentage reduction in lost workdays

Employee accidents per (million) hours worked

Workers’ comp cost per $100 in payroll (by department)

In addition, there are several other industry standard measures that can be used to

evaluate program effectiveness. Among these are the recordable injury rate and the

experience modification rate (e-mod).

Recordable Injury Rate - In all OSHA states (Virginia is one); employers are required to

keep an OSHA 300 log of recordable injuries and illnesses. This report is sent out

annually by the Manager, Occupational Safety and Health (Human Resources).

Departments that wish to get a feel for how they are doing on injuries can compare their

rate against like entities per 100 FTEs.

Experience Modification Rate (E-Mod) E-Mod rating compares the City’s workers’

compensation claims experience to other employers of similar size operating the same

77

type of business. Most employers who have an annual premium in excess of $3,000 will

receive an E-Mod. The process is used to modify the published rates for rating

classifications by taking into account the actual reported losses and payrolls. It is a

financial incentive to minimize the financial cost of workplace injuries. E-Mod is used to

reward organizations that practice effective safety and claims management techniques.

As an example of how the E-Mod affects premium consider the following example:

A company has $800,000 in payroll for a labor class code of 5183

The established rate per $100 payroll dollars is $8.25

The company’ premium would be (800,000/100) x $8.25 = $66,000

With an E-Mod of 0.80, the company’s premium would be ).80 x $66,000 =

$52,800 (a savings of $13,200)

Consider the same company with an E-Mod of 1.20

The company’s premium would be $66,000 x 1.20 = $79,200 (a penalty of

$13,200)

Insurers begin with a ‘manual rate’ that would reflect pricing if the e-mod is 1.0

(experience equals expected losses). A number less than 1 equates to a favorable

claims experience while a number greater than 1 indicates a worse than normal claims

experience.

Public entities in Virginia are not required to report experience modification rates to the

NCCI (the official repository of rate data). The insurance actuary for the City does

calculate an experience modification rate utilizing the same methodology and formula

as the NCCI. The most recent rate for the City was 1.782.

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79

CITY OF VIRGINIA BEACH, VIRGINIA

RISK MANAGEMENT INTERNAL SERVICE FUND

COMBINING STATEMENT OF NET ASSETS

JUNE 30, 2011

ASSETS

Current Assets:

Cash and Investments 13,653,705$

Accounts Receivable -

Due from Commonwealth -

Inventory -

Prepaid Support and Maintenance -

Total Current Assets 13,653,705$

Noncurrent Assets:

Capital Assets:

Site Improvements -$

Machinery and Equipment 293,215

Total Property, Plant and Equipment 293,215$

Less Accumulated Depreciation 293,215

Net Property, Plant and Equipment -$

Total Assets 13,653,705$

LIABILITIES

Current Liabilities:

Vouchers and Accounts Payable 221,167$

Deposits Payable -

Current Portion of Long-term Liabilities 5,509,238

Total Current Liabilities 5,730,405$

Noncurrent Liabilities:

Long-term Liabilities (less current portion) 18,731,157$

Total Noncurrent Liabilities 18,731,157$

Total Liabilities 24,461,562$

NET ASSETS

Invested in Capital Assets, net of related debt -$

Unrestricted (10,807,857)

Total Net Assets (10,807,857)$

80



COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

FOR THE YEAR ENDED JUNE 30, 2011

OPERATING REVENUES

Billings to Departments 9,157,027$

Insurance Recovery 16,227

Miscellaneous 100

Total Operating Revenues 9,173,354$

OPERATING EXPENSES

Personal Services 367,817$

Fringe Benefits 131,067

Contractual Services 594,392

Internal Services 9,910

Other Charges 8,495,312

Total Operating Expenses 9,598,498$

OPERATING INCOME (LOSS) (425,144)$

NONOPERATING REVENUES (EXPENSES)

Interest Income 44,365$

Transfers In 7,900,000

Gain (Loss) on Disposition of Assets 150

Total Nonoperating Revenues (Expenses) 7,944,515$

CHANGE IN NET ASSETS 7,519,371$

TOTAL NET ASSETS - BEGINNING (18,327,228)

TOTAL NET ASSETS - ENDING (10,807,857)$

81



COMBINING STATEMENT OF CASH FLOWS


CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from Customers and Users 9,173,254$

Other Operating Cash Receipts 100

Cash Payments to Suppliers of Goods and Services (9,649,313)

Cash Payments to Employees for Services (519,113)

Net Cash Provided (Used) By Operating Activities (995,072)$

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES

Receipts from (Payments to) Other Funds 7,900,000$

Payments to Other Funds -

Net Cash Provided By Noncapital Financing Activities 7,900,000$

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES

Acquisition and Construction of Capital Assets -$

Proceeds from Sale of Salvage 150

Net Cash Provided (Used) By Capital and Related

Financing Activities 150$

CASH FLOWS FROM INVESTING ACTIVITIES

Interest and Dividends Received 44,365$

Net Increase (Decrease) in Cash and Temporary Investments 6,949,443$

Cash and Temporary Investments, July 1 6,704,262

Cash and Temporary Investments, June 30 13,653,705$

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COMBINING STATEMENT OF CASH FLOWS


RECONCILIATION OF OPERATING INCOME (LOSS) TO

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:

Operating Income (Loss) (425,144)$

Adjustments to Reconcile Operating Income (Loss) to

Net Cash Provided (Used) By Operating Activities:

Depreciation Expense -$

(Increase) Decrease in Accounts Receivable -

(Increase) Decrease in Inventory -

Increase (Decrease) in Vouchers and Accounts Payable (94,843)

Increase (Decrease) in Deposits Payable -

Increase (Decrease) in Estimated Claims and Judgments (454,855)

Increase (Decrease) in Accrued Compensated Leave (20,230)

Total Adjustments (569,928)$

Net Cash Provided (Used) By Operating Activities (995,072)$

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FY11 Expenditures for Risk Management

Budget Unit

Object Code

Description Expenditures

WORKERS’ COMPENSATION

04035 603407 Other Contractual Services $ 574,475

04035 605310 Workers’ Comp Insurance Premiums $ 465,566

04035 605311 Self-Insured Paid Losses-WC $ 5,791,536

Workers’ Compensation Total $ 6,831,577

PROPERTY INSURANCE PREMIUMS

04035 605302 Fire and Property Insurance $ 1,145,554

OTHER INSURANCE PREMIUMS

04035 605306 Surety Bonds $ 36,502

04035 605307 Public Officials Liability Insurance $ 47,784

04035 605399 Miscellaneous Insurance $ 216,126

04036 605399 Miscellaneous Insurance $ 2,050

Other Insurance Premiums Total $ 302,462

LEGAL SUPPORT AND SERVICES

04035 603102 Legal Service $ 4,636

04035 603107 Legal Support Charges $ 89,311

04036 603102 Legal Services $ 302

Legal Support and Services Total $ 94,249

GENERAL AND AUTO LIABILITY EXPENSES

04035 605305 Motor Vehicle Insurance $ 200,692

04035 605308 General Liability Insurance $ 229,363

04035 605312 Self-Insured Paid Losses-Auto Liability $ 263,951

04035 605313 Self-Insured Paid Losses-GL $ 300,063

04035 605314 Self-Insured Paid Losses-City Property $ 68,807

04035 605315 Self-Insured Losses-Miscellaneous $ 3,554

General and Auto Liability Expenses Total $ 1,066,430

Broker Fees/Actuarial Study (Included in Other Contractual Services)

$ 83,944

SALARIES

04036 601111 Salaries-Unspecified $ 374,414

04036 601401 Contracted Manpower $ 13,632

04036 601405 Compensated Absence $ (20,229)

Salaries Total $ 367,817

BENEFITS

04035 605501 Professional Improvement $ 875

04035 605502 Travel-Routine $ 11

04036 602101 FICA $ 22,221

04036 602104 FICA Medicare $ 5,197

04036 602201 Retirement $ 63,862

04036 602301 Health Insurance $ 37,800

04036 602302 Life Insurance $ 1,017

04036 602309 Flexible Benefits Program $ 270

84

FY11 Expenditures for Risk Management

Budget Unit

Object Code

Description Expenditures

04036 602403 Employee Service $ 100

04036 602950 Cell Phone Stipend $ 600

04036 603301 Advertising $ 1,025

04036 605501 Professional Improvement $ 6,438

04036 605502 Travel-Routine $ 1,128

04036 605801 Dues and Associations Membership $ 2,550

Benefits Total $ 143,094

OTHER ADMINISTRATIVE EXPENSES

04036 603104 Independent Audit $ 677

04035 603150 Professional Services $ 4,525

04035 603163 Financial Services $ 22,500

04036 603204 Software Support and Maintenance $ 48,960

04036 603407 Other Purchased Services $ 8,595

04036 604103 Telecommunications $ 4,001

04036 604401 Print Shop Charges $ 3,898

04035 604401 Print Shop $ 962

04036 604501 Risk Management Charges $ 1,048

04036 605201 Postal Services $ 1,351

04036 605999 Cash Deps Overs $ 320

04036 606001 Office Supplies $ 2,518

04036 606412 Books and Subscriptions $ 2,321

04036 606439 License Plates $ 494

Other Administrative Expenses Total $ 102,170

04035 Sub-Total $ 9,466,817

04036 Sub-Total $ 586,560

Division Total Cost $10,053,353

Less Reduction Actuarial Liability - $ 454,855

$ 9,598,498

85


Insurance Program

TABLE I Coverage Type of Policy Policy

Term Policy Number Carrier Limits Deductible

Aviation (Other Ins)

Insurance for: 1989 Bell 206B III Helicopter 2006 Bell 407 Helicopter

08/01/201008/01/2011

AV 1854515-07

Commerce & Industry

$25,000,000 Per Incident

$10,000 in motion $1,000 not in motion

Medical Prof. Liability (Other Ins)

Professional Liability insurance coverage for doctors working part time for the Dept. of HS

Schoenfield, Renee B.

04/17/201004/17/2011

VAD-0078457-04

Professional’s Advocate Ins Co.

Primary-$1,000,000 Occur Primary-$3,000,000 Agg Excess-$1,000,000 Occur Excess-$3,000,000 Agg

N/A

Kadakkal, Sreeja

06/01/201006/01/2011

VAD-0079948-03



N/A

Griswald, James

01/23/201001/23/2011

VAD-0067749-09



N/A

Laster, James M.

01/23/201001/23/2011

VAD-0067748-09



N/A

Rosen, David

08/01/201008/01/2011

VAD 0081636-02



N/A

Karpov, Vladimir

07/01/201007/01/2011

VAD-0082708-01



N/A

Freeman, Rudolph

06/29/2010 06/29/2011

VAD-0073405-03



N/A

Excess Workers’ Comp

Compulsory coverage for the medical costs, lost wages and other compensation for all work-related employee injuries and diseases

03/01/201103/01/2012

SP-4042753

Safety National

$25,000,000

$850,000

86

City of Virginia Beach Insurance Program

TABLE I

Coverage Type of Policy Policy Term

Policy Number Carrier Limits Deductible

Property

First party insurance that indemnifies the owner or user of property for its loss when the damage is caused by a covered peril such as fire or explosion. Also covers the financial loss due to business interruption.

03/01/201103/01/2012

84144045

Lexington

$1,000,000,000

$50,000

Excess

3rd Party Liability Coverage excess the

self-insured retention 03/01/201103/01/2012

SEL 3000423 States Self Insurers Risk Retention Group

$10,000,000 $20,000,000

$2,000,000

Automobile Liability “ “ “ “ “

General Liability “ “ “ “ “

Other Ins Public Officials Liability “ “ “ “ “

Police Professional Excess “ “ “ “ “

Other Ins Terrorist “ “ “ “ “’’

Crime Employee Dishonesty/Public Officials 03/01/201103/01/2012

103038683 Travelers Commercial Crime

$1,000,000 – form O $100,000 – Form B,&C $1,000,000 – Comp Fraud-form F

Form O $25,000 Form B $2,500 Form C1 $25,000 Form C2 $25,000 Form F $25,000

Crime (Other Ins)

Deferred Compensation Plan/Fiduciary 03/01/201103/01/2012


$5,000,000

N/A

Crime Employee Dishonesty/Development Authority (Eco Dev. pays premiums)

03/01/201003/01/2013


$2,000,000/$5000,000/ $100,000

$20,000/$5,000 $2,500

Farmers Market (Other Ins)

General Liability

03/01/201103/01/2012

WS023261

Travelers/St. Paul Travelers/Northfield

$1,000,000 $2,000,000

N/A

Hull (Other Ins)

Direct property damage to the vessels hull and machinery (dredges & police boats)

03/01/201103/01/2012

N5JH11157

International Marine Underwriters

$1,000,000 Per Incident

N/A

Marina Liability (Other Ins)

Legal liability of the insured for the loss or damage to vessels in our care (Lynnhaven Marina)

03/01/201103/01/2012

N5JH1156

Northern assurance Insurance Company of America

$1,000,000

N/A

Nurses (Other Ins)

Misc. Medical Professional Liability

03/01/201103/01/2012

HPG0255847734

American Casualty Company of Reading PA/HPSO

$2,000,000 ea. claim $4,000,000 Aggregate

N/A

TULIP (Other Ins)

Tenant Users Liability for events held on city property

03/01/201103/01/2012

GL00505-02

Employers Fire Insurance Co

$1,000,000

N/A

Volunteer-Non Uniform

A person who is a registered volunteer worker in a city activity sponsored by the policy holder

03/01/201103/01/2012

10-SR-129030

Hartford Serviced and handled by Marsh NY

$10,000

N/A

87

City of Virginia Beach Organizational Structure for Risk Management Breakdown

TABLE II

Organizational Category Department Administration & Public Safety Municipal Council

City Clerk

City Attorney

Commissioner of the Revenue

City Real Estate Assessor

City Treasurer

Circuit Court

Commonwealth’s Attorney

Sheriff

General Registrar

Audit Services

City Manager’s Office

Organizational Development

Volunteer Resources

Media and Communications Group

Clerk of the Circuit Court

Police

Fire

Economic Development/Vitality Planning

Agriculture

Economic Development

Convention & Visitor Development

Housing

Museums

Health & Human Services Human Resource

Parks & Recreation

Libraries

Human Services

Infrastructure Finance

Public Works

Public Utilities

Communications and Information Technology

Management and Budget

Facilities Management

88

City of Virginia Beach General Liability and Automobile Liability Claims

TABLE III

General Liability Losses Claim Count Paid Reserves Incurred

2007 Administration & Public Safety/Constitutional Offices 108 $77,105 $7,646 $84,751 Health and Human Services 93 $69,532 $0 $69,532 Infrastructure 285 $200,955 $0 $200,955 Economic Development/Vitality 12 $1,633 $0 $1,633

Total 498 $349,225 $7,646 $356,871

2008 Administration & Public Safety/Constitutional Offices 103 $1,001,416 $6,000 $1,007,416 Health and Human Services 81 $20,089 $0 $20,089 Infrastructure 257 $254,183 $26,444 $280,627 Economic Development/Vitality 7 $196 $0 $196

Total 448 $1,275,884 $32,444 $1,308,328

2009 Administration & Public Safety/Constitutional Offices 57 $10258 $4,275 $10,683 Health and Human Services 62 $17,961 $7,500 $25,461 Infrastructure 218 $268,546 $623,967 $892,513 Economic Development/Vitality 7 $1,005 $5,000 $6,005

Total 344 $297,770 $640,742 $934,662

2010 Administration & Public Safety/Constitutional Offices 77 $7,014 $1,850 $8,864 Health and Human Services 60 $15,139 $105,200 $120,340 Infrastructure 209 $279,811 $18,588 $298,399 Economic Development/Vitality 1 $0 $100 $100

Total 347 $301,964 $125,738 $427,703

2011 Administration & Public Safety/Constitutional Offices 42 $6,268 $8,000 $14,268 Health and Human Services 38 $9,175 $800 $9,975 Infrastructure 120 $156,450 $37,804 $194,254 Economic Development/Vitality 2 $0 $1,100 $1,100

Total 202 $171,893 $47,704 $219,597

89

City of Virginia Beach General Liability and Automobile Liability Claims

TABLE III

Automobile Liability Losses Claim Count Paid Reserves Incurred

2007 Administration & Public Safety/Constitutional Offices 81 $209,562 $0 $209,562 Health and Human Services 32 $138,261 $0 $138,261 Infrastructure 51 $149,059 $0 $149,058 Economic Development/Vitality 6 $8,108 $0 $8,108

Total 170 $504,989 $0 $504,989

2008 Administration & Public Safety/Constitutional Offices 62 $83,065 $14, 968 $98,033 Health and Human Services 16 $60,748 $0 $60,748 Infrastructure 46 $197,098 $0 $197,098 Economic Development/Vitality 8 $4,289 $0 $4,289

Total 132 $345,200 $14,968 $360,168

2009 Administration & Public Safety/Constitutional Offices 38 $92,902 $1,330 $94,232 Health and Human Services 20 $79,672 $66,876 $146,548 Infrastructure 35 $141,708 $100 $141,808 Economic Development/Vitality 5 $6,888 $0 $6,888

Total 98 $321,170 $68,306 $389,476

2010 Administration & Public Safety/Constitutional Offices 25 $32,159 $11,449 $43,609 Health and Human Services 11 $27,681 $2,500 $30,181 Infrastructure 37 $110,428 $104,016 $214,443 Economic Development/Vitality 0 $0 $0 $0

Total 73 $170,268 $117,965 $288,233

2011 Administration & Public Safety/Constitutional Offices 28 $59,411 $28,166 $87,577 Health and Human Services 13 $16,083 $29,000 $45,083 Infrastructure 25 $31,211 $33,793 $65,004 Economic Development/Vitality 4 $4,322 $528 $4,850

Total 87 $111,027 $91,488 $202,515

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Departments with the highest percentage of the number of workers’ compensation claims (frequency) in 2011

TABLE IV

Department Claim Type Claim Count

Total Paid Reserves Incurred % of Freq % of Cost

Police Indemnity 76 $408,242.79 $312,548.07 $720,790.86 6.73 32.17

Incident Only 96 $0.00 $0.00 $0.00 8.50 0.00

Medical Only 119 $100,142.53 $34,950.49 $135,093.02 10.53 6.03

Total 291 $508,385.32 $347,498.56 $855,883.88 25.75 38.20

Parks & Recreation Indemnity 40 $48,838.19 $54,089.80 $102,927.99 3.54 4.59

Incident Only 61 $0.00 $0.00 $0.00 5.40 0.00

Medical Only 107 $39,877.69 $18,569.55 $58,447.24 9.47 2.61

Total 208 $88,715.88 $72,659.35 $161,375.23 18.41 7.20

Public Works Indemnity 36 $140,493.38 $85,945.75 $226,439.13 3.19 10.11

Incident Only 42 $0.00 $0.00 $0.00 3.72 0.00

Medical Only 81 $66,334.55 $23,119.00 $89,453.55 7.17 3.99

Total 159 $206,827.93 $109,064.75 $315,892.68 14.07 14.10

Sheriff Indemnity 26 $83,429.34 $99,052.35 $182,481.69 2.30 8.14

Incident Only 72 $0.00 $0.00 $0.00 6.37 0.00

Medical Only 33 $22,060.37 $4,998.20 $27,058.57 2.92 1.21

Total 131 $105,489.71 $104,050.55 $209,540.26 11.59 9.35

Human Services Indemnity 36 $52,812.91 $101,969.93 $154,782.84 3.19 6.91

Incident Only 28 $0.00 $0.00 $0.00 2.48 0.00

Medical Only 26 $21,224.14 $8,073.19 $29,297.33 2.30 1.31

Total 90 $74,037.05 $110,043.12 $184,080.17 7.96 8.21

Fire Indemnity 29 $99,319.68 $115,628.69 $214,948.37 2.57 9.59

Incident Only 11 $0.00 $0.00 $0.00 0.97 0.00

Medical Only 37 $19,541.67 $8,174.95 $27,716.62 3.27 1.24

Total 77 $118,861.35 $123,803.64 $242,664.99 6.81 10.83

All Others Indemnity 38 $120,607.78 $70,219.83 $190,827.61 3.00 8.52

Incident Only 63 $0.00 $0.00 $0.00 4.69 0.00

Medical Only 76 $64,473.28 $16,053.07 $80,526.35 5.75 3.60

Total 177 $185,081.06 $86,272.90 $271,353.96 13.45 12.11

Grand Total 1130 $1,287,398.30 $953,392.87 $2,240,791.17 100.00 100.00

Departments with the lowest percentage of the number of workers’ compensation claims (frequency) in 2011

Public Utilities Indemnity 12 $32,719.44 $14,732.59 $47,452.03 1.06 2.12

Incident Only 11 $0.00 $0.00 $0.00 0.97 0.00

Medical Only 22 $9,918.93 $7,511.58 $17,430.51 1.95 0.78

Total 45 $42,638.37 $22,244.17 $64,882.54 3.98 2.90

91


Departments with the highest percentage of workers’ compensation incurred expenses (severity) in 2011

TABLE V

Department Claim Type Claim Count

Total Paid Reserves Incurred % of Freq % of Cost

Police Indemnity 76 $408,242.79 $312,548.07 $720,790.86 6.73 32.17

Incident Only 96 $0.00 $0.00 $0.00 8.50 0.00

Medical Only 119 $100,142.53 $34,950.49 $135,093.02 10.53 6.03

Total 291 $508,385.32 $347,498.56 $855,883.88 25.75 38.20

Public Works Indemnity 36 $140,493.38 $85,945.75 $226,439.13 3.19 10.11

Incident Only 42 $0.00 $0.00 $0.00 3.72 0.00

Medical Only 81 $66,334.55 $23,119.00 $89,453.55 7.17 3.99

Total 159 $206,827.93 $109,064.75 $315,892.68 14.07 14.10

Fire Indemnity 29 $99,319.68 $115,628.69 $214,948.37 2.57 9.59

Incident Only 11 $0.00 $0.00 $0.00 0.97 0.00

Medical Only 37 $19,541.67 $8,174.95 $27,716.62 3.27 1.24

Total 77 $118,861.35 $123,803.64 $242,664.99 6.81 10.83

Sheriff Indemnity 26 $83,429.34 $99,052.35 $182,481.69 2.30 8.14

Incident Only 72 $0.00 $0.00 $0.00 6.37 0.00

Medical Only 33 $22,060.37 $4,998.20 $27,058.57 2.92 1.21

Total 131 $105,489.71 $104,050.55 $209,540.26 11.59 9.35

Human Services Indemnity 36 $52,812.91 $101,969.93 $154,782.84 3.19 6.91

Incident Only 28 $0.00 $0.00 $0.00 2.48 0.00

Medical Only 26 $21,224.14 $8,073.19 $29,297.33 2.30 1.31

Total 90 $74,037.05 $110,043.12 $184,080.17 7.96 8.21

Parks and Recreation Indemnity 40 $48,838.19 $54,089.80 $102,927.99 3.54 4.59

Incident Only 61 $0.00 $0.00 $0.00 5.40 0.00

Medical Only 107 $39,877.69 $18,569.55 $58,447.24 9.47 2.61

Total 208 $88,715.88 $72,659.35 $161,375.23 18.41 7.20

All Others Indemnity 38 $120,607.78 $70,219.83 $190,827.61 3.00 8.52

Incident Only 63 $0.00 $0.00 $0.00 4.69 0.00

Medical Only 76 $64,473.28 $16,053.07 $80,526.35 5.75 3.60

Total 177 $185,081.06 $86,272.90 $271,353.96 13.45 12.11

Grand Total 1130 $1,287,398.30 $953,392.87 $2,240,791.17 100.00 100.00

Departments with the lowest percentage of workers ’ compensation incurred expenses (severity) in 2011

Public Utilities Indemnity 12 $32,719.44 $14,732.59 $47,452.03 1.06 2.12

Incident Only 11 $0.00 $0.00 $0.00 0.97 0.00

Medical Only 22 $9,918.93 $7,511.58 $17,430.51 1.95 0.78

Total 45 $42,638.37 $22,244.17 $64,882.54 3.98 2.90

92

City of Virginia Beach Internal Service Fund – Risk Management

TABLE VI

Fiscal Year Total Net Assets-Ending Dollar Change Per Cent age change

2006 ($11,994,365) $2,494,504 26%

2007 ($13,433,030) $1,438,665 12%

2008 ($12,732,220) ($700,810) (5.3%) Improvement

2009 ($13,511,281) ($779,061) 6%

2010 ($18,327,228) ($4,815,947) 36%

2011 ($17,670,208) $657,020 (3.6%) Improvement

93

Hampton Roads Area Workers’ Compensation Benchmarking Study

TABLE VII

Municipality Measure 2006 2007 2008 2009 2010

A Total Claims Cost $2,408,775 $4,016,542 $3,205,273 $2,774,635 $1,266,882

Total # Reported Claims 872 799 795 830 752

Total FTEs 3,755 3,865 3,766 4,073 3,804

Total # Open Claims 5 10 14 23 78

# Indemnity Claims 104 94 89 68 88

Total Claims in Litigation 10 12 15 11 4

Total Payroll $245,435,549 $259,695,714 $277,885,593 $280,130,799 $294,711,857

B Total Claims Cost $1,925,671 $2,371,812 $1,974,821 $1,301,352 $917,950


Total FTEs 3,831 3,958 4,029 3,676 3,766




Total Payroll $132,945,608 $146,605,252 $154,689,021 $157,097,566 $149,358,267

C Total Claims Cost $2,408,775 $4,016542 $3,205,273 $2,774,635 $1,266,882


Total FTEs 1,792 1,796 1,803 1,795 1,675




Total Payroll $129,031,000 $134,402,000 $136,892,000 $140,558,000 $137,360,000

D Total Claims Cost $81,022 $106,971 $203,858 $1324,547 $194,343


Total FTEs 878 1,141 1,029 920 1,027




Total Payroll $31,395,485 $35,057,835 $34,200,554 $30,511,135 $33,663,029

94

Hampton Roads Area Workers’ Compensation Benchmarking Study TABLE VII

Municipality Measure 2006 2007 2008 2009 2010

Virginia Beach Total Claims Cost $7,109,839 $5,278,455 $6,876,543 $5,798,571 $3,470,743

Total # Reported Claims 1,383 1,415 1,211 1,164 1,206

Total FTEs 8,521 8,609 8,572 8,416 8,295




Total Payroll $285,309,647 $299,679,113 $313,298,261 $313,481,563 $309,232,922

Total Total Claims Cost $6,824,243 $10,511,867 $8,589,225 $6,985,169 $3,646,057

Total # Reported Claims 1,678 1,634 1,580 1,625 1,598

Total FTEs 10,256 10,760 10,627 10,464 10,272




Total Payroll $538,807,642 $575,760,801 $603,667,168 $608,297,500 $615,093,153

Average Measure 2006 2007 2008 2009 2010

Group Average Cost per Claim $4,066.89 $6,433.21 $5,436.22 $4,298.57 $2,281.64

Annual Cost per FTE $665.39 $976.94 $808.25 $667.54 $354.95

Frequency Rate 16.361 15.186 14.868 15.529 15.557

% Open Claims 1.0131 1.2852 1.9620 3.5692 9.0738

% Indemnity Claims 9.5948 11.0771 11.0759 8.4308 7.9474

% Litigated Claims 1.9070 2.3256 2.9747 2.0308 1.3141

WC Cost as % of Payroll 1.2665 1.8257 1.4228 1.1483 0.5928

City of Virginia Beach Average Cost per Claim $5,140.88 $3,730.36 $5,678.40 $4,981.59 $2,877.90

Annual Cost per FTE $834.39 $613.13 $802.21 $688.99 $418.41

Frequency Rate 16.230 16.436 14.127 13.831 14.539

% Open Claims 1.3015 1.2014 2.2296 2.6632 5.6385

% Indemnity Claims 7.5922 8.6219 10.5698 14.5189 16.6667

% Litigated Claims 0.8677 0.6360 0.4955 0.5155 0.2488

WC Cost as % of Payroll 2.4920 1.7614 2.1949 1.8497 1.1224

95

Terms and Definitions

actuarial report

Result of an actuary's study of an organization's loss experience, using probability theory and other methods of statistical analysis. Can be used to determine an insured's projected losses, a self-insured's liability accruals, the adequacy of a property and casualty insurer's statutory loss reserves, or a life insurer's unearned premium (technical) reserves.

automobile liability insurance

Insurance that protects the insured against financial loss because of legal liability for automobile-related injuries to others or damage to their property by an auto.

average weekly wage (AWW)

An employee's pre-injury earning capacity, based on earnings in the 12 month period directly preceding a work-related injury or illness. The formula for calculating average weekly wage in Virginia equals earnings of the injured employee in the capacity in which he was working at the time of the injury, for the 52 weeks preceding the injury divided by the number of weeks worked.

benchmarking

The act of comparing a measurement to a standard. It shows you where you are and helps you decide where you want to go.

bodily injury

Liability insurance term that includes bodily harm, sickness, or disease, including resulting death.

bond

A three-party contract in which one party, the surety, guarantees the performance or honesty of a second party, the principal (obligor), to the third party (oblige) to whom the performance or debt is owed.

claim

A demand by an individual or corporation to recover, under a policy of insurance, for loss which may come within that policy (first party claim). A demand brought by persons allegedly injured or harmed by the insured (third party claim).

claimant

The person making a claim. Use of the word "claimant" usually denotes that the person has not yet filed a lawsuit. Upon filing a lawsuit, claimant becomes a plaintiff, but the terms are often used interchangeably.

96

compensable

An injury or illness that meets the statutory standard and qualifies an employee to receive workers compensation benefits.

contributory negligence

Negligence of a plaintiff or claimant constituting a partial cause or aggravation of his or her injury. This doctrine bars relief to the plaintiff in a lawsuit if the plaintiff's own negligence contributed to the damage. Contributory negligence has been superseded in some states by other methods of apportioning liability.

deductible

A portion of covered loss that is not paid by the insurer. Most property insurance policies contain a per-occurrence deductible provision that stipulates that the deductible amount specified in the policy declarations will be subtracted from each covered loss in determining the amount of the insured's loss recovery.

depreciation

The decrease in the value of property over a period of time, usually as result of age, wear and tear from use, or economic obsolescence. Actual physical depreciation (wear and tear from use) is subtracted from the replacement cost of insured property in determining its actual cash value. Courts in some jurisdictions have allowed insurers to deduct depreciation due to economic obsolescence as well.

disability for workers compensation

A condition that incapacitates a person in some way so that he or she cannot carry on normal duties. Disability may be total, partial, permanent, or temporary, or a combination of these.

excess insurance

A policy or bond covering the insured against certain hazards, and applying only to loss or damage in excess of a stated amount, or specified primary or self-insurance. That portion of the amount insured that exceeds the amount retained (self-insured) by an entity for its own account.

excess workers compensation insurance

A type of coverage available for risks that choose to self-insure the majority of workers compensation loss exposures. Two categories of coverage are available: specific, which controls loss severity by placing a cap on losses the insured must pay arising out of a single occurrence; and aggregate, which addresses loss frequency by providing coverage once a cumulative per occurrence loss limit is breached.

fiduciary liability

The responsibility on trustees, employers, fiduciaries, professional administrators, and the plan itself with respect to errors and omissions in the administration of employee

97

benefit programs as imposed by the Employee Retirement Income Security Act (ERISA).

frequency

The likelihood that a loss will occur. Expressed as low frequency (meaning the loss event is possible but the event has rarely happened in the past and is not likely to occur in the future), moderate frequency (meaning the loss event has happened once in a while and can be expected to occur sometime in the future), or high frequency (meaning the loss event happens regularly and can be expected to occur regularly in the future). Workers compensation losses normally have a high frequency as do automobile collision losses. General liability losses are usually of a moderate frequency, and property losses often have a low frequency

general liability-insurance

Insurance protecting commercial insured from most liability exposures other than automobile and professional liability.

gross negligence

Willful and wanton misconduct.

hard market

One side of the insurance market cycle that is characterized by high rates, low limits, and restricted coverage.

incurred losses

The total amount of paid claims and loss reserves associated with a particular period of time, usually a policy year. Incurred losses are customarily computed in accordance with the following formula: loss occurring and paid during the period, plus outstanding losses reserved at the end of the period. This does not ordinarily include incurred but not reported (IBNR) losses.

incurred but not reported (IBNR) losses

An estimate of the amount of an insurer's (or self-insurer's) liability for claim-generating events that have taken place but have not yet been reported to the insurer or self-insurer. The sum of IBNR losses plus incurred losses provides an estimate of the insurer's eventual liabilities for losses during a given period.

indemnity payments

The losses paid or expected to be paid directly to an insured by an insurer for first-party (e.g., property) coverage or on behalf of an insured for third-party (e.g., liability) coverage. The losses paid or expected to be paid directly to an insured by an insurer for coverage. Restoration to the victim of a loss up to the amount of the loss.

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insurance

A contractual relationship that exists when one party (the insurer) for a consideration (the premium) agrees to reimburse another party (the insured) for loss to a specified subject (the risk) caused by designated contingencies (hazards or perils) up to predetermined limits.

insurance policy

In broad terms, the entire printed insurance contract. Generally, an insurance policy is assembled with a combination of various standard forms, including a declarations page, coverage form, and endorsements. Sometimes a cause of loss form is also required. Together these forms delineate the coverage term, the insurance policy limits, the grant of coverage, exclusions and other limitations of coverage, and the duties and responsibilities of the insured in the event of a loss.

insurance recovery fund

This fund was created in Fiscal Year 08-09 to track recoveries or subrogation. Automobile insurance claim recoveries under $1,000 go back into the Automotive Services parts line item. Recoveries over $1,000 go into the General Fund-Insurance Recovery Fund Revenue account. Automobile Services may ask City Council to appropriate these funds. This action will not artificially inflate expenditures and provide an audit trail.

insurance requirements

The part of a commercial contract in which the types and minimum amounts of insurance the parties agree to provide in connection with their performance of the contract are specified.

liability

Any legally enforceable obligation. Within the context of insurance, the obligation to pay a monetary award for injury or damage caused by one's negligent or statutorily prohibited action.

liability limits

The stipulated sum or sums beyond which an insurance company is not liable for payments due to a third party. The insured remains legally liable above the limits.

loss control

A risk management technique that seeks to reduce the possibility that a loss will occur and/or reduce the severity of those that do occur. Also known as risk control or safety. Driver training programs are loss control programs that seek to reduce the likelihood of accidents occurring. Sprinkler systems are loss control devices that reduce the severity of loss by fire.

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loss reserve

An estimate of the value of a claim or group of claims not yet paid. A case reserve is an estimate of the amount for which a particular claim will ultimately be settled or adjudicated. Insurers will also set reserves for their entire books of business to estimate their future liabilities. Expenses of adjusting claims, e.g., allocated claim expenses; court costs, fees, and expenses of independent adjusters, lawyers, witnesses, and other expenses that can be charged to specific claims; and unallocated claim expenses which represent salaries and other overhead expenses that are incurred in adjusting and recording claims but which cannot be charged against specific claims.

occupational disease

Any abnormal condition or disorder, other than one resulting from an occupational injury, that is caused by, or alleged to be caused by, exposure to environmental factors associated with employment, including acute and chronic illnesses or diseases that may be caused by inhalation, absorption, ingestion, or direct contact. State workers compensation laws vary as to whether coverage is afforded for occupational disease.

occupational injury

An injury arising in the course and scope of employment that is caused by factors associated with the work undertaken.

occurrence year

The time period defined by a body of losses composed of all claims occurring during a particular 12 month period.

paid losses

That portion of incurred losses actually paid out by an insurer or self-insured entity.

permanent partial disability

A workers compensation disability level in which the injured employee is still able to work but not with the skill and efficiency demonstrated prior to the injury. As a result, the earning capability of the worker is affected. Workers compensation statute provides for scheduled benefits based on the percentage of disability.

permanent total disability

A class of workers compensation disability in which the injured employee is incapable of ever working again at any employment. It becomes a lifetime award without the 500 week imitation.

premium

The amount of money an insurer charges to provide the coverage described in the policy or bond.

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property damage

As defined in the general liability policy, physical injury to tangible property including resulting loss of use and loss of use of tangible property that has not been physically injured.

reserves

The amount of funds necessary to meet all future costs related to an insurance claim. Reserves are the “best” estimate of the additional amount that will need to be paid out against a claim. Reserves are an unfunded liability that must be paid as costs are incurred.

return-to-work program

A post-injury program that returns injured employees to some type of work as soon as medically possible. Even if the injured workers are impaired, temporary or modified duties can be assigned that take into consideration the impairments. The end result is the reduction of indemnity costs associated with the claims and a greater chance for recovery.

risk management

The practice of identifying and analyzing loss exposures and taking steps to minimize the financial impact of the risks they impose.

risk management techniques

Methods for treating risks. Traditional risk management techniques for handling event risks include risk retention, contractual or noninsurance risk transfer, risk control, risk avoidance, and insurance transfer.

risk retention

Planned acceptance of losses by deductibles, deliberate non-insurance and loss-sensitive plans where some, but not all, risk is consciously retained rather than transferred.

risk retention group (RRG)

A group self-insurance plan or group captive insurer operating under the auspices of the Federal Liability Risk Retention Act (RRA) of 1986 that can cover all the liability exposures, other than workers compensation exposures, of its owners. Risk retention groups are not subject to the individual state laws that would otherwise prohibit the formation of group captives or make it difficult to form or operate them.

self-insurance

A system whereby a firm sets aside an amount of its monies to provide for any losses that occur—losses that could ordinarily be covered under an insurance program. The monies that would normally be used for premium payments are added to this special fund for payment of losses incurred. Self-insurance is a means of capturing the cash

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flow benefits of unpaid loss reserves and also offers the possibility of reducing expenses typically incorporated within a traditional insurance program. It involves a formal decision to retain risk rather than insure it and is distinguished from noninsurance or retention of risks through deductibles, by a formalized plan or system to pay losses as they occur.

severity

The amount of damage that is (or that may be) inflicted by a loss or catastrophe. Sometimes quantified as a severity rate, which is a ratio relating the amount of loss to values exposed to loss during a specified period of time.

soft market

One side of the insurance market cycle that is characterized by low rates, high limits, flexible contracts, and high availability of coverage.

temporary partial disability

A workers compensation disability level in which the injured worker is temporarily precluded from performing a certain set of job skills but who can still work at a reduced level. Since the condition is temporary, compensation is based on the difference between the two earning levels, AWW before the injury and the amount after the injury. This is subject to the 500 week limitation.

temporary total disability

One of the four divisions of disability compensable under workers compensation. This level of disability reflects an injury that has rendered the employee completely unable to perform any job functions on a temporary basis. The employee is expected to make a full recovery and return to work. In the interim, compensation paid is 66 2/3% of weekly wages until the worker returns to the job.

third-party administrator (TPA)

A firm that handles various types of administrative responsibilities, on a fee-for-services basis, for organizations involved in self-insured programs. These responsibilities typically include claims administration, loss control, risk management information systems, and risk management consulting.

total cost of risk

Total cost of risk is the sum of all aspects of an organization’s operations that relate to risk, including retained (uninsured) losses and related loss adjustment expenses, risk control costs, insurance premiums, and administrative costs.

workers compensation

The system by which no-fault statutory benefits prescribed in state law are provided by

an employer to an employee (or the employee's family) due to a job-related injury

(including death) resulting from an accident or occupational disease.

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2011 - vbgov.com :: city of virginia beach · 2016-01-29 · virginia beach, virginia 23456 dear...

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