Gardena Finds a Way to Lower Insurance Bills: Its Own Firm

The newest insurance agent in Gardena may soon be the city of Gardena.

After several years of planning, the City Council last week signed agreements with firms that will manage and market a city-operated company. Only approval from the state Department of Insurance is needed before the city gets into the insurance business.

If the state approves, Gardena also hopes to sell insurance to other California cities hard-hit by skyrocketing insurance rates. It may eventually offer policies to Gardena businesses and residents.

Councilman Mas Fukai, a former insurance agent, said he came up with the idea of a city-owned insurance company after watching Gardena’s insurance rates rise quickly while claims against the city remained low.

To fund the new company, the council has authorized the issuance of up to $20 million in bonds, and its partners have also provided capital.

Fukai said he expects Gardena, which paid $1.6 million in premiums for insurance from 1981 to 1989, to give all its municipal business to the new company, which will charge lower rates.

Fukai said the company will carefully select other cities as potential insurance clients, concentrating on those with solid risk-management programs. It will initially target cities with fewer than 250,000 residents.

Fukai said a survey of California cities by Gardena officials indicates wide interest in the program. Forty-two percent of the cities responded to Gardena’s survey, and of those, 92% expressed an interest in the company, city officials said.

Fukai said a company specializing in municipal insurance will charge less and provide better coverage than the self-insurance Gardena began using in 1990 or the insurance pools that many other cities have formed to share their risks.

The pools lump low-risk cities such as Gardena with higher-risk cities, forcing those with fewer liabilities to subsidize the others, he said.

On Tuesday, the council signed an agreement with Industrial Indemnity Co., a San Francisco-based company that will manage the Gardena program, and Corroon & Black, which will run the program’s marketing plan from its San Diego office. Once the firm is incorporated, its board of directors will include representatives from the city, Corroon & Black and Industrial Indemnity.

Fukai said the new company already has a solid footing because of the participation by Corroon & Black and Industrial Indemnity. Those two companies provide insurance for about 70% of the school districts in the state, according to company officials.

After the new company gains experience, Fukai said, it may consider offering insurance to Gardena’s businesses or even its residents.

“I believe this will put Gardena on the map,” Fukai said.