Up until the 1980s, local governments had two ways to purchase property and casualty coverage: commercial insurance or individual self-insurance. But, both options presented challenges.
Commercial insurance is expensive and adds approximately $75 in overhead to every $100 in claims. Self-insurance is more efficient, adding only $25 per $100 in claims; however, most local governments don't have the size to retain a substantial portion of the risk. And, even government units large enough to retain the risk often lack the resources necessary to properly administer their programs.
That's where a Joint Insurance Fund (JIF) creates the most value.
A JIF brings together a number of local governments to 1) create the critical mass needed for self-insurance, 2) jointly purchase the excess insurance needed to cover large claims and 3) create the specialized administration needed to effectively manage the program.
It's simple: A JIF is created for the people, and managed by the people. By law, a JIF is a local government entity, not an insurance company. Every member appoints a commissioner (a mayor, council member or local official) and the group convenes monthly to make important decisions about the future of their insurance program.
In New Jersey, the NJMEL consists of 19 separate JIFs that collectively cover more than 60 percent of the local governments in the state. With an annual budget of $175 million and a statutory surplus of $125 million, New Jersey's MEL system is the third largest governmental self-insurance pool in the country.Click here to learn more about JIFs.