Although we will want to know the entire pertinent premium structures of the bidding carriers, we will be directly comparing the specific weekly premium quotations you insert on these four pages for Northern California, Southern California and Marietta, Georgia. 2. For reasons of stability and the fact that this new program has been the subject of collective bargaining negotiations (three-year contracts are presently in force), we are specifying a two-year guarantee of quoted premium rates. Will you agree to a two-year guarantee period for your initially quoted premiums and maintenance of contract during this two-year period. 3. In addition to vehicles generally insured under the "Family Automobile Policy" will you insure: a. Motorcycles and scooters b. Campers c. Trucks d. Dune buggies or other unusual vehicles If so, please indicate your method of premium determination for both Liability and Physical Damage. 4. Do you have claims facilities in all the cities where we have shown Lockheed locations? Please specifically list these claim facilities by number and city. If you do not have claims facilities at all these locations, how do you propose to service claims in such cities. Are you willing to provide on-permises claims adjusters at Lockheed's major locations? Would you consider the use of certain specified garages for some types of repair work without requiring the employee to obtain a number of bids? 5. In paying claims, whether from your facilities or on-site at Lockheed locations, will you use your own salaried claims adjusters or do you contemplate using independent adjusters? 6. In conjunction with the "Eligibility" section, we really see no need for an assigned risk category in your proposal. Will you propose lesser restrictions as to eligibility than we have specified and are you willing to review ineligible employees periodically. i.e.. less than five years after those convictions specified. 7. In the "Enrollment" section, we have given you an indication of the number of counselors/service people we believe will be required, at least during the first year of enrollment. Your premium quotation should be on the basis of the insurance carrier furnishing this requirement. Also, please tell us what the difference in cost would be i.e., your percentage reduction in premium rates, if another organization such as Marsh & McLennan, Inc. provides the counselors/ service people. For cost purposes, you should use the estimate of 21 people who represent a combination of personal counselors and inside service personnel. The counselors will definitely be on Lockheed premises and the service personnel should be assigned full time to the Lockheed program. The service personnel would work primarily by telephone and could be housed in either your offices or ours. 8. What experience have you had in underwriting payroll deducation Automobile insurance programs? Please list the larger such groups, effective date of the program and the number of employees you are currently insuring. 9. A necessary requirement of your proposal will be a "hold harmless" agreement for Lockheed in connection with this new program. Enclosed is a copy of a "hold harmless" agreement which has been prepared by Lockheed's legal department for your consideration. Will you agree to this specific agreement? If not, enclose an alternative agreement. 10. Can you underwrite this program with an effective date no later than February 1, 1969 in at least all of California and Georgia? If you will not be ready at all other Lockheed locations to underwrite such a program, please list the states and dates when you will be so prepared. 11. Will you maintain experience figures (premiums, claims, reserves, etc.) for Lockheed with a breakdown by form of coverage (including limits) location. age classification and automobile usage? 12. What additional services, if any, not included in the specifications are you willing to provide such as safety material and insurance company communications? We anticipate that the final selection of carrier will be made during the latter part of November and the program will be announced to employees about the first week in January, 1969. The deadline for us to receive your formal proposal is the close of business on November 14, 1968. You must bid on the specifications. but are also free to offer additional alternatives for our consideration. If you need additional information, please call any of the following: Messrs. Thomas L. Fassett or Michael Mirsky Marsh & McLennan, San Francisco 415 918-1900 Messrs. Douglas M. Michel or Joseph Holtzer Marsh & McLennan, Los Angeles 213 381-3282 The program at each location will be based on the following classifications: Auto Use 1. Pleasure or commuting less than 15 miles one-way. 2. Commuting 15 miles or more one-way. 3. Business use. Family Drivers 1. No male drivers under age 25. 2. Married male drivers under age 25. 3. Unmarried male drivers age 21 to 25. 4. Unmarried male drivers under age 21. Driving Record 1. No at-fault accidents (more than $200 damage) during past 12 months. 2. Only one in past 12 months. 3. A total of two or more during past 12 months. Territory Sunnyvale, Calif., location: 1. Santa Cruz County 2. Santa Clara, Contra Costa or Alameda County 3. San Mateo County and City of Oakland 4. San Francisco County Burbank, California, location: 1. San Fernando Valley, Long Beach and Los Angeles County west of LaCienega Boulevard 2. San Gabriel Valley (including Pasadena) and Glendale 3. North Los Angeles County (Palmdale, Newhall, Saugus, etc.) 4. Los Angeles City other than above Marietta, Georgia, location: 1. Douglas County 2. Gwinnet County 3. Cobb, De Kalb, Fulton or Clayton County For each territory listed below provide weekly premium quotation using the following classes: Use. Pleasure or commuting less than 15 miles one-way. Family driver.-No male drivers under age 25. Driving record.-No accident during past 12 months. Coverage. Quote separately for 15/30/5 (10/20/5 in Georgia), $1,000 Medical & Uninsured Motorists, and 35,000 CSL, 1,000 Med., & Uninsured Motorists (25,000 in Georgia). Territory Sunnyvale, Calif., location: 1. Santa Cruz County. 2. Santa Clara, Contra Costa, or Alameda County. 3. San Mateo County and city of Oakland_. 4. San Francisco County.. Burbank, Calif., location: 1. San Fernando Valley, Long Beach and Los Angeles County west of LaCienega Boulevard.. 2. San Gabriel Valley (including Pasadena) and Glendale. 3. North Los Angeles County (Palmdale, Newhall, Saugus, etc.). 4. Los Angeles City other than above.. Marietta, Ga., location: 1. Douglas County. 2. Gwinnett County 3. Cobb, De Kalb, Fulton, or Clayton County. Indicate weekly rates for full coverage comprehensive and $100 deductible collision for each territory of the three locations using the following classes: Use. Pleasure or commuting less than 15 miles one-way. Family driver.-No male drivers under age 25. Driving record.-No accident during past 12 months. 2. Santa Clara, Contra Costa, or Alameda County. Burbank, Calif., location: 1. San Fernando Valley, Long Beach, and Los Angeles 2. San Gabriel Valley (including Pasadena) and Glen- 3. North Los Angeles County (Palmdale, Newhall, Saugus, etc.).. 4. Los Angeles City other than above.. Marietta, Ga., location: 1. Douglas County. 2. Gwinnett County. 3. Cobb, De Kalb, Fulton, or Clayton County Indicate Percent increase factor for the following additional current automobile values: Indicate percent increase factor over lowest class in each of the three categories 1. No at-fault accidents (more than $200 damage) during past 12 months._ 2. Only 1 in past 12 months__ 100 Indicate percentage factor for the following alternative collision insurance deductibles: $100 deductible. Percent 100 $50 deductible. $250 deductible.. Indicate your multicar discount_ For Georgia locations indicate farm use credit__ LOCKHEED AIRCRAFT CORPORATION, GENTLEMEN: This will confirm our understanding and agreement that in consideration of Lockheed's assistance in the administration of the (plan for automobile insurance) through its implementation of a payroll deduction program the Insurance Company will and hereby does indemnify Lockheed Aircraft Corporation and its employees, agents and servants against and hold them harmless from any and all losses, costs, claims, damages and liabilities of whatsoever nature or kind arising out of or in any way connected with the administration, application or interpretation of the (plan for automobile insurance). It is further understood that the agreement of Insurance Company to indemnify and hold Lockheed Aircraft Corporation harmless as hereinabove set forth shall include, but not be limited to, any and all liabilities, claims or losses arising out of or based on any representations, statements, descriptions or information contained in any printed booklet, certification of insurance or other written material which Insurance Company has prepared or approved for distribution to the Lockheed employees who are covered by or participate in (plan for automobile insurance). AUTOMOBILE INSURANCE OCTOBER 4, 1968. Although there are a number of so-called group automobile insurance plans in effect today, they generally involve small groups and follow rather standard procedures with respect to rating, claims processing, cancellation and so on. None of them even remotely approach the potential broad scope of a plan which would cover all Lockheed employees. In effect, we are pioneering in this field and we should take full advantage of our position to negotiate the best possible arrangement for our employees. The announcement of this program has produced a tremendous interest among other employers, other unions and most important of all, the insurance carriers. Although the plans of this type are commonly referred to as "group" plans, they do not follow the true group principle. True group insurance is generally thought of as being insurance which is extended to all members of a group. Generally the group is rated as a whole, has the same coverage except for differences based upon factors such as wage rate, and do not contain any restrictions against participation except restriction based upon items such as service time or seniority requirements. On the other hand auto insurance plans are mass merchandising programs with individual contracts covering each participant based upon the coverage which he elects. The plans include the following characteristics not found in a true group plan: 1. Individual employees for specified reasons may be refused coverage. 2. Again for specified reasons, coverage may be discontinued for individual participants. 3. Varying premium rates are charged depending on the coverages selected and the individual circumstances of the insured. 4. No enrollment quota is imposed since by rating each individual in accordance with a specified formula, the element of selection against the carrier is eliminated. There are many advantages to this type of insurance. Among them are the following: 1. The rate advantages inherent in the mass merchandising technique. It is estimated that premium rates for a given coverage will be about 20% under the current rate levels of the so-called "Bureau" insurance companies (Travelers, Aetna, etc.) and will be about 15% under the rates charged by the direct writing companies (Allstate, State Farm, various automobile clubs, etc.). 2. The convenience of payroll deduction. 3. More effective claims handling because of the concentration of the insured in a limited geographical area. 4. Again because of the mass nature of this type of underwriting, it is feasible, in our opinion, to use a greatly simplified rating formula even to the extent of developing a procedure whereby a participant rates himself. Such an approach would be a far cry from standard rating procedures where there are hundreds of possible combinations based upon the coverage elected by the employee and the particular circumstances surrounding the insured such as auto usage, family drivers, driving records, etc. In our opinion a successful program should contain the following elements and these items and details should be contained in the specification given the insurance carrier when the program is placed out for bid. 1. Adequate benefits that provide reasonable optional coverages, but at the same time simplified to the point where the coverages and options afforded are readily understood and to a certain extent limited. A simplified and readily understood plan is essential in order to gain wide acceptance and participation among the employees. (Exhibit 1-Description of coverage.) It should be noted that under liability insurance rather than to quote as one amount for a single individual such as $100,000, a higher amount such as $300,000 per occurrence, and a much lower amount such as $10.000 for property damage all liability per occurrence for bodily injury and property damage is covered under a single maximum. This is an example of simplification that works to the advantage of the employee. 2. Eligibility It is essential that in our specifications to the insurance companies it be made clear under what circumstances the carrier can refuse to cover an applicant. Conviction of a felony. Conviction of hit and run driving. Conviction of drunk driving. (Under many circumstances the carrier would probably voluntarily cover individuals convicted of these crimes on a regular or assigned risk basis.) Explanation of an assigned risk. (In most states applicant must be covered— at least on a pooled basis-if he has a valid driver's license-liability only, however.) Carrier would retain the right to cancel upon due notice upon the subsequent conviction of one of the above crimes by an insured. Conversion privileges at standard rates. No restrictions on drop outs renewing coverage. 3. Claims Claims handling would be the responsibility of the carrier. Each participant would be given a policy kit which would include detailed instructions as to where to go and who to call in the event of an accident as well as instructions for completing forms which should be filed with the carrier describing the nature of the accident. Each carrier would be asked as a part of the specifications whether or not it would be willing to designate specific garages in each area to which an insured could go without necessity of obtaining bids. The carrier would be required to provide periodic reports on premiums and claims. 4. Carrier It is essential that the carrier chosen have facilities to process claims in all states. 5. Solicitation. The key to the solicitation will be a brochure or booklet which each employee will be given describing in detail the coverages available including a self-rating form through which the employee will rate himself and determine the appropriate premium with respect to each type of coverage and other factors affecting his rate as follows: |