Forces in the insurance industry are pushing up the cost of insurance for the taxpayer-owned Fayetteville Public Works Commission, and the utility is taking steps to mitigate that, the utility’s board was told on Wednesday morning.
And some coverage costs are going down, Risk Analyst Mark Cannady said during the presentation to the board.
The PWC, owned by the city of Fayetteville, provides water, sewer and electricity to much of the Fayetteville area. Overhead costs such as insurance premiums can affect the rates it charges its customers.
“We invest approximately $3 million in total premium towards all these policies,” Cannady said. “This falls into industry average, which is 1 to 3 percent of operating expenses. So we’re right in line with the industry average for utilities,” he said.
The insurance is to protect the PWC’s property, valued at $1.149 billion, Cannady said. The value rose more than $300 million in the past five years, he said. The PWC owns electrical generation equipment and transmission systems, water and sewer service infrastructure, buildings, land and other assets.
The PWC also has insurance to cover crashes and other losses involving the PWC’s vehicles and drivers. And the utility has excess liability insurance, which covers incidents after the primary policies reach their limits.
The utility also recently added coverage for damage caused by terrorism, he said.
“The reason we’ve done that, is because sometimes there’s some dispute — and if it’s domestic terrorism or outside terrorism, things like that — which hold up those claims,” Canady said. It was “a pretty cheap add on” that will allow the PWC to quickly start recuperating its losses from these events, he said.
As for vehicle insurance, the PWC has 307 vehicles that last fiscal year were driven more than 2 million miles. And there were only three incidents (such as crashes) for which insurance claims were paid, he said. The payouts were below $100,000 each in 2022, 2023 and 2024, according to a chart Canady presented.
However, 2021 was an expensive year, with 13 incidents and payouts totaling nearly $1 million.
Things that drive up insurance prices in the industry include “nuclear” verdicts (in which juries award damages of more than $10 million), rising costs for parts and repairs, and rising costs for medical care, Canady said. He also said that natural disasters (such as Hurricane Helene), rising property values and aging infrastructure also are factors.
In an effort to control the price the PWC pays for insurance, Canady said the utility has:
- Installed cameras on all of its vehicles to provide evidence of fault and monitor driver behavior.
- Changed its driver qualification system. Drivers with poor records are prohibited from driving PWC vehicles.
- Continually marketed itself to insurance providers, so competition among the companies can lower prices and increase coverage.
Senior reporter Paul Woolverton can be reached at 910-261-4710 and pwoolverton@cityviewnc.com.
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