EMU uses M.U.S.I.C. to save insurance costs
YPSILANTI - A massive fire raged through Sherzer Hall March 9, 1989, causing $5.3 million in damages making it one of the most devastating blazes in Eastern Michigan University history.
While EMU’s commercial insurer covered the damages and Sherzer was restored and open for business 19 months after the fire, the incident was the catalyst for the University to find a more cost-efficient coverage alternative to a commercial property carrier.
The answer was a unique consortium called the Michigan Universities Self-Insurance Corporation (MUSIC).
The consortium started in 1987 and initially covered general liability, and errors and omissions liability. Property insurance followed in October 1989, and automobile coverage was offered in 1991.
Eleven of the 15 public state universities are members who pool their resources and obtain low-cost insurance coverage. Michigan State University and the three University of Michigan campuses have chosen to “go it alone,” said Dan Salk, assistant director of EMU’s Risk Management Department.
Through M.U.S.I.C., EMU lowers the cost of insurance while maintaining the type of property coverage that rebuilt Sherzer Hall.
“The University is like a mini city. It’s a specialized market with unique risks,” said Salk. “The campus needs automobile and medical malpractice insurance, in addition to general liability, errors and omission liability and property damage.”
M.U.S.I.C. works similar to an individual’s automobile insurance. The institution’s claim history and a deductible help determine the annual payment made by each M.U.S.I.C. member. Any claim above the deductible is covered to a maximum amount by the consortium’s pool of funds. An outside commercial carrier covers a third level of payment, above M.U.S.I.C.’s maximum amount.
Long-range planning to reduce risk and keep insurance costs down through the M.U.S.I.C. consortium continues to benefit EMU today.
Last year, EMU paid $24,145 for general liability insurance as a M.U.S.I.C. member. If it had to obtain the same insurance through an outside carrier, the premium would be approximately $221,144, according to the organization’s 2004-2005 Premium Benchmarking Study.
“When it started, M.U.S.I.C. was an experiment. The members didn’t know whether it would work,” said Salk.
But work, it did.
After approximately eight years, any funds remaining in a year’s pool are eligible to be distributed to members. Dividends are determined by the premiums paid and annual loss history of each member. Since 1987, more than $1.8 million has been returned from M.U.S.I.C. to the University. In 2005 alone, $456,052 came back to EMU.
Creating an alternative to the commercial insurance market proved to be an EMU legacy of the late Mary Brooks, Salk said. Brooks was EMU’s director of risk management and workers’ compensation from 1978-2003. She was one of the initial forces behind M.U.S.I.C.
“EMU’s goal is to efficiently utilize its funds and with M.U.S.I.C., we maintain insurance coverage for the campus, while obtaining the lowest rates possible. This was a tremendous project that Mary helped create for the University, ” said Salk.
Eastern Michigan University is a public, comprehensive university that offers programs in the arts, sciences and professions. EMU prepares students with the intellectual skills and practical experiences to succeed in their careers and lives, and to be better citizens.
Eastern Michigan University is a public, comprehensive university that offers programs in the arts, sciences and professions. EMU prepares students with the intellectual skills and practical experiences to succeed in their career and lives, and to be better citizens.
Editor's Note: Looking for an expert source for a story? Check out EMU's Eastern Experts online at www.emich.edu/univcomm/easternexperts.