The original idea for the sharing of road commission risks was born during the 1970s and developed during the early 1980s. Several road commissions led the County Road Association of Michigan (CRA) in efforts to address three basic difficulties: 1) Erosion of governmental immunity; 2) Increasingly litigious society; and 3) Hard market cycles of the insurance industry causing dramatic increases in premiums and cancellations of policies. Enabling legislation to allow the pooling of risk was sought during the early 1980s and P.A. 138 was passed by the Michigan legislature in 1982.
County road commissions then created the Michigan County Road Commission Self-Insurance Pool (MCRCSIP). MCRCSIP was formed as a Trust and began operations April 1, 1984 with thirty-seven (37) members. Over the next several years, membership grew to the present level of seventy-eight (78) members.
MCRCSIP is governed by a Trust Agreement and Intergovernmental Agreements signed by each member, and by an approved set of by-laws. A board of directors that is elected by the membership is responsible for MCRCSIP administration. Day-to-day management is the responsibility of the Administrator employed by the Board of Directors. We have a Third Party Administrator (TPA), to assist in the areas of risk management and claims management. The TPA is responsible to the Administrator and reports to the Board at each of its meetings.
MCRCSIP supplies the following coverage for its members: General Liability, Auto Liability, Employment Practices/Public Officials Errors & Omissions, Employee Fidelity and Faithful Performance, and Physical Damage Coverage for Buildings & Contents, Off-Road Equipment and Licensed Vehicles. Performance Bonds are also available from MCRCSIP.
MCRCSIP bills each member an annual contribution for their coverage. An actuary calculates the total funding requirement using Excess/Reinsurance Fees, Claims Reserves and the Administrative Budget.
The Board of Directors engages the services of a consultant to apply the “Best’s Capital Adequacy Model” to MCRCSIP’s year-end results. This study determines how much capital is necessary to support underwriting, investment and credit risks; determines the total MCRCSIP year-end capital available; and then compares the amount of available capital to the necessary capital to determine if an excess exists. The Board then determines if the excess can be returned to the members in the form of a refund.
The founders of MCRCSIP identified three main objectives for pooling:
- To gain control of their own destiny by:
- Managing, controlling and reducing losses,
- Establishing a joint effort to vigorously defend claims, and
- Providing a united effort to effect favorable legislation
- To maintain control over funds necessary to provide needed protection; and
- To lower ultimate costs.
Because of the dedication and long-term commitment of each member and the board of directors they have elected, MCRCSIP has been successful in attaining all three-goals.