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CREATION OF THE TML POOL
CREATION OF THE TML POOL
Traditionally the insurance industry has followed up-and-down cycles. The reasons for these cycles vary; but, may be triggered by changes to the legal system, competitive atmospheres, changes in company philosophy, etc. When premiums are high and losses are low, insurance companies compete for new business by lowering rates. Once losses begin to occur, premiums are raised to cover these losses. Eventually, premiums are lowered again to attract more new business. Insurance consumers must endure the unpredictability of these "soft" and "hard" market cycles that are beyond their control. The stability of the insurance industry continues to be of concern.
The enactment of the Tennessee Governmental Tort Liability Act, in 1973, created one of these cycles for municipal liability coverages. This change to the legal system made liability insurance unavailable or unaffordable. Tennessee local governments had to have a stable market for this insurance.
This concept was not unique. Municipalities in other states had used the interlocal cooperative approach to provide for different types of municipal insurance needs. The specific purpose of this first ever municipal liability pool would be to provide affordable, dependable liability coverage for the cities, towns and related public entities of Tennessee. Several thousand public entities nationwide now participate in governmental pools, rather than purchase commercial insurance.
INSURANCE POOL NOT AN INSURANCE COMPANY
The TML Pool was created to provide insurance coverage to local governments; however, it is not an insurance company. A pool is a cooperative risk sharing arrangement that works in many ways like a traditional insurer. Participating members pay a premium, receive coverage, and make claims against that coverage.
Based on the fact that entities of like purpose can, in most cases, better serve themselves, pool members gain several advantages:
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· Members avoid the unpredictable ups and downs (cycles) of the traditional market.
· Rates, coverages, and services are based solely on Tennessee municipal exposures.
· Structure of the Pool makes it more flexible and more responsive to the needs of members. |
The unique relationship between local governments and the TML Pool sets us apart from traditional insuring methods. The TML Pool is a risk management, coverage/service provider and has the advantage of being able to tailor coverages and services for local government needs and through the risk management process, control the costs for these coverages and services.
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