In May, a tornado destroyed South Iron School in southeast Missouri the day before students headed off for summer vacation. Last year, a hailstorm hit a St. Louis-area school district, causing a bus to crash into an entire fleet.
The freeze-thaw event for the 2022-23 school year caused pipes to burst across the state during winter school breaks, especially in rural areas where fewer staff were in buildings.
Climate change has increased the number of storms, hail, tornadoes, and other extreme weather events in Missouri in recent years. Those storms are causing further damage and wear and tear to school buildings.
The Missouri Associated School Insurance Council, a nonprofit that provides insurance to 90% of the state’s school districts, said the cost of paying claims has more than doubled since 2017. The group needed to raise fees for schools for the first time in 2024. It’s been almost 20 years.
An increase in storms will likely necessitate another rate hike in 2025.
Ron Orr, MUSIC’s executive director, said costs have increased over time but will remain at a steady pace through 2023.
“It just kind of exploded,” Orr said. “And unfortunately, 2024 was much, much worse.”
Homeowners and school districts across the country are dealing with soaring property and casualty insurance premiums in the wake of wildfires, hurricanes, flooding and other extreme weather events.
In New Orleans, Alaska and Arkansas districts, premiums increased by more than 30% in one year. In areas where extreme weather events occur frequently, some homeowners find themselves unable to obtain insurance at all.
Risk Pooling in Missouri
Schools can purchase insurance directly from carriers, insure themselves, or opt-in to an insurance pool.
The Missouri Associated School Insurance Council is a self-funded risk pool. The insurance premium paid by the school will be used to pay the insurance claim. If the claim is very high, MUSIC goes to the private insurance market and buys “excess coverage.”
Orr said ModelHelp keeps prices low and provides services tailored to Missouri schools.
“We are not part of a large corporate structure with overhead costs,” Orr said. “You can usually get it much cheaper.”
As a nonprofit organization, MUSIC can reimburse school districts if reserves reach a certain level. Orr said MUSIC returned approximately $150 million to Missouri schools from 2011 to 2023.
When a risk pool purchases excess coverage from a private company, its premium rates are often higher to account for hurricanes, wildfires, and storms in all areas covered by that private insurance company.
The intensity and incidence of disruptive events are increasing
Dr. David Buck, Superintendent of Lee’s Summit School District, is a member of MUSIC’s Board of Directors. He said organizations are forced to charge additional fees because property damage frequently occurs due to weather events.
Insurers used to consider wind and hail to be a “secondary concern” because they weren’t destructive enough to cause extensive and expensive damage.
“As the intensity and incidence of the hazards increases, they are no longer considered secondary hazards,” Buck said.
Buck said the pool’s roughly 500 members didn’t have to pay $20 million in property damage damages until 2019, but they paid $27 million in 2022 and $38 million in 2023. . By the end of July 2024, the group has already reached its compensation amount, Buck said. Property damage was $43 million.
MUSIC charged 15.39% per $100 of the assessed value of the building. Buck said he raised that number to 16.60% last year. Although this is the first increase in about 20 years, it is still below industry standards.
Tristen Rouse
/
st louis public radio
Eric Joyner, transportation supervisor for the Ralls County School District, watches as children board electric school buses. The number of school buses a school district owns affects the school district’s liability insurance rates.
Other factors are also driving up premiums. Rising construction and labor costs have increased the value of buildings, making insurance more expensive.
Independent Superintendent Dr. Dale Haar said the district’s assets are valued at $650 million for the 2020-2021 school year. When Independence was renewed this year, that jumped to about $955 million.
“Even if you don’t do a complete overhaul of the building, just having to replace it will significantly increase the cost of service for that work,” Haar says.
Independence is independently insured because it is large enough and claims are low enough that doing so saves money, Haar said. Still, Herle said, despite the district’s efforts to lower premiums by raising deductibles from $25,000 to $1 million, property insurance premiums will continue to rise from about $650,000 in the 2020-2021 school year. In this update, the amount has increased to $1.7 million, he said. He said he had not filed a claim for compensation “for years”.
He said fewer contractors and builders are now willing to bid on schools, reducing competition in the market, which also leads to higher insurance costs.
Other school districts in the Kansas City area are experiencing similar challenges.
The Blue Valley School District is insured through Travelers, which paid $597,764 in premiums for the 2019-2020 school year. The amount will nearly triple to $1,564,123 in the 2024-25 school year, which district leaders say is due to an increase in insured buildings, equipment and property values. The group said extreme weather conditions are also causing insurance companies to charge higher premiums. Liberty Public Schools said its insurance premiums have increased 68% over the past five years due to weather events, increased property assessments and the addition of new buildings. The district receives property coverage through Midwest Public Risk, and North Kansas City Schools paid Chubb $254,000 in property insurance premiums in 2019 and $1.15 million in 2024. He said he changed insurance companies and both the premium rate covered and the value of his property increased. The Fort Osage School District’s current property insurance rate is $414,155. Five years ago, it was $341,266. The increase is due to a rise in interest rates and an increase in area. Shawnee Mission School District is insured through Travelers, and its property insurance premiums were $1,762,510 for the 2024-2025 school year. In the 2019-2020 school year, it was $549,541.
“Plan for the worst and hope for the best.”
The independent school district has set aside $1 million in capital project funding to help cover the large bill.
Buck, of the Lee’s Summit School District, said schools will have to cover the cost of the insurance increase from existing budgets. He said his district tries to spend about 82% to 85% of its budget on staff salaries and benefits.
“Every time we have an increase like this in the remaining 18 to 15 percent, there’s just not enough to get to the classrooms,” Buck said.
Orr said MUSIC is hiring an actuary to plan future interest rates. A high claims year like 2023 may have been an anomaly, but it happened two years in a row and the Group plans for future years to be similar for the time being.
“My philosophy has always been ‘prepare for the worst and hope for the best,'” Orr said. “This means a lot of what the actuary will dictate to us about future interest rate settings.”
