Your Ldf Rates are in your Control
Rate letters have been received by association leaders. Next year’s costs are being projected by those same leaders. Some are thankful for the savings their group will derive. Others are lamenting over their increase, wondering how to pass on the news to their members. This time of year can be a lot like New Year’s, with people looking back to how they got to where they are in regard to their rates. Some will make a half-hearted resolution to reel them in, some will notify their members of the new price and go on with little regard, and others will take the concrete steps to self-determination of what their future rates will look like.
The vast majority of our members can truly empower themselves to shape how their rates will look. Plan 1, which most of our members are enrolled in, is an “experience” or “usage”-based plan in regard to your rate. What this means is your rate for the year going forward is based on your usage the prior year. The more you use, the more you will pay during the next rating cycle. Plan 3 also utilizes an experienced-based rate setting in the same way.
Understanding now that usage drives individual rates, there are numerous ways an association can take control. Find out what coverage you have purchased. There is turnover in leadership positions. Some association presidents and treasurers don’t know what coverage was purchased by their previous leaders. Do you have Plan 1 with the optional non-scope rider policy? I have found that many people think the only cost of the non-scope rider is the $5 fee tacked onto their rate. This could not be further from the truth. What that $5 really did was bring all kinds of new incidents into coverage that would not have been covered if not for purchasing the non-scope rider policy. Those cases now being covered will affect your usage or experience, as we discussed above. It is a decision each association has to make for itself as to whether this is an additional cost it wants or can afford, to bear. For those struggling with increased costs or for those who simply don’t want to pay to cover those DVs or DUIs any longer, consider dropping the non-scope rider and you can immediately realize a $5 rate drop, and more likely than not an additional decrease over time in usage.
Next, ask yourself if your attorneys are being utilized in the most efficient manner. That takes a couple of forms.
First, do you really need an attorney to represent you for an attitude complaint or for a fender bender? Perhaps, but maybe a well-trained board member from your own association would suffice. PORAC offers fantastic Internal Affairs training classes several times a year. I would propose that the cost of sending a couple of your board members to this type of training would more than pay for itself
if implemented correctly.
Second, have you developed a relationship with your primary LDF provider? By cultivating a relationship with your firm of choice, both sides might take a longer-term perspective. To an extent, they will have a vested interest in your LDF rate as well. Conversely, if you are one of the groups that designate every firm in your half of the state for use by
your members, the attorneys might not concern themselves with your financial well-being and in turn, bend over backward to find new and innovative ways to submit bills which, again, will ultimately find their way to your association’s next year’s experience rating.
The LDF Trustees and staff are happy to expand on the concepts presented in this article. Attend a PORAC IA class — there are still two coming up this year, August 7—8 and December 10—11. This is the time of year to take the steps that can translate into rate relief next year.