Governments that wish to manage costs and liability increasingly seek privatization of services as a solution. One negative side effect of this solution is that the smaller, private programs do not have the resources to obtain comparable benefits for their employees and clients, benefits that were previously provided by the government and are often required by law. Insurance presents a particular difficulty because the programs find that they either cannot locate insurance or they cannot meet the cost of a policy.
This problem was particularly challenging in New York City, where, by law, all private contractors are required to carry liability insurance, workers' compensation, and disability insurance for all employees. In 1988, the City's government recognized this problem as an obstruction to privatization and created the Citywide Central Insurance Program (CCIP).
The program acts on behalf of private agencies by creating a purchasing pool that effectively bids for professional brokerage services, develops in-house strategies to prevent losses, and provides liability, compensation, and disability insurance to all their employees. In sum, the innovation of the program is to provide a coordinated package of benefits and services, publicly managed and privately offered, to maximize available funding and focus on prevention as an alternative to claims.
Incredibly, this service is provided to one of every seven New York City citizens. More specifically, there are over 2,000 contracted agencies working with the program to provide insurance to their 62,000 employees. Other clients include 38,000 children in day care programs, 32,000 disabled and indigent home care recipients, 1,000 homeless adults, and over 750,000 youths participating in after-school and evening activities sponsored by the Youth Service Agency and funded by the City.
Additionally, the employers of the private agencies benefit from relief of the responsibility for selecting and negotiating with brokers, adjusters, and others, leaving them open to focus on the services they provide.
From a financial standpoint, the program is also quite effective. Successful negotiations have obtained a savings of over $1.5 million in reduced commissions and other fees. The City's required reserve was decreased by $1.6 million due to reduced filings from early, aggressive claims intervention. Also, the City has maintained a stable loss history, despite growing litigation citywide in personal injury and liability claims.
Most effective, however, is the innovative program of loss prevention and control that has reduced not only the City's financial liability but also the incidence of pain and suffering by clients and staff. Due to the centralization of insurance claim oversight, CCIP is able to identify areas with high potential for injury and claim, and then address them proactively. For instance, when injuries resulting from lifting and carrying were identified to be the single greatest cause of injuries on any particular job site, CCIP initiated the "Back Belt Program" to protect workers. Even further, CCIP persuaded their carrier, Continental Life, to finance the belts for the program as a preventative treatment.
As the movement towards privatization spreads across city and state governments in the United States, there will be increased efforts to address the challenge of providing the support traditionally obtained through the government's powerful resources. CCIP has provided a solution to this challenge that helps to create safe and more cost-effective public services.