Responding to Two Common Pooling Misconceptions (June 22, 2020 Pooling Perspective)

  

By Ann Gergen, Executive Director

AGRiP has been approached by three national news organizations interested in learning more about how pools influence local law enforcement policies and practices. Some of our members have also been contacted, as have several law enforcement agencies, cities, counties and public entity membership associations.

If your organization receives a media inquiry and you want additional information or assistance from AGRiP, let me know. 

In response to this sort of outreach, I find myself sharing two core pooling realities many outside our community don’t readily appreciate:

1. If you’ve seen one pool, you’ve seen (only) one pool.

There is a high degree of variation within public entity pooling that newcomers often aren’t aware of. It’s easy to assume that pools generally experience the same claims trends or that public entities everywhere would all benefit from the same coverage provisions or risk management programs. 

I usually try to overcome this assumption by explaining three fundamental variables that make all pools different from one another: Each pool has its own specific jurisdiction of operation (generally one state or province), membership and coverages. I explain these three variables as a baseline because they generate other circumstances that create further diversity among pools.

For example, think just about the influence of where a pool operates. A pool’s location impacts (a) the compensability, costs of care and wage replacement parameters for workers’ compensation benefits, (b) liability protections for public entity operations, (c) the benefits structure and cost of health care provided to public entity employees, and (d) requirements for unemployment benefits provided. A pool’s location in a particular state or province will also impact its (e) rate-making and net position practices, (f) governance structure, and (g) membership. Finally, location influences (h) the physical risks to property a pool covers.

Add in variables for the types of members a pool covers and coverage it offers, and you have a list of considerations far too long to sum up in a 10-minute interview or 500-word article.

2. It’s fundamentally flawed to compare pooling methods, measures or mindsets to transaction-based models.

Pools are an extension of the public entities they serve. Because pools exist to enable member public entity operations, they are not merely an alternative to traditional insurance. 

This is a nuance I find particularly difficult to explain. If you haven’t directly seen and felt the pooling environment, it’s pretty hard to understand how different its foundational assumptions are from those underpinning traditional insurance relationships.

Sometimes, I compare this to the difference between eating a meal at a restaurant and eating a meal you’ve prepared during a cooking class. Either way, you pay money in exchange for food and a night out. But the expectations you have based upon those two purchase options and what you will take away from each experience are entirely different.

When public entities choose pool coverage, they aren’t just making a menu selection and expecting to be served a meal in return. They’re buying into a shared experience akin to participating in a cooking class: Pools share a recipe and expert instruction, but members are allowed to mix and match ingredients to suit their own tastes. Class participants practice alongside one another, all hoping to learn and improve. Sometimes, the recipe variations explored in class turn out better than the original and the instructions are updated as a result. Over time and with feedback, the instructor may refine their teaching approach as well. 

Ultimately, each class is unique because the entire experience is very much a product of the whole and not merely a commodity transaction. Every single interaction between a pool and its members and every related decision a pool makes about its operations is influenced by this commons – not commodity – approach.

--

Responding to inquiries like the ones recently received poses another dilemma: Most pools aren’t interested in promoting themselves or their purpose through the media, choosing instead to focus energy solely on member needs. AGRiP operates with much the same mindset, generally responding to inquiries only where doing so seems purposeful and valuable to the whole of our membership.

As we continue to monitor inquiries and pool responses, we’d be happy to hear your thoughts and input, including ways you’ve been successful at sharing the nuances of public entity pooling outside our community.

--

Ann Gergen is AGRiP’s executive director and a former pool administrator. She has worked closely with and for pools, public entities, reinsurers and related service providers throughout her career.


#PoolingPerspectives

Permalink