Tactical Budgeting: Showing a Return on Investment

ROI — return on investment — can happen in many ways when it comes to operations and budget requests: dollars, time, improved officer skill, collision reductions, less downtime for vehicle repairs, fewer citizen injuries, preventing and winning lawsuits, and savings on insurance premiums. Your agency already has the money to fund training programs — reduce your insurance claims!

The North Carolina League of Municipalities’ Risk Management Services Division is the insurance company for about 250 police departments. The division analyzes claims data continuously to help agencies focus on training that will reduce their claims and save them money, like driving, Taser deployment, use of force, officer fitness and employment actions. The League’s analysis on the cost of collisions two years ago may prove to be helpful comparison information in justifying or expanding your EVOC training requests.

  • $3,000 — average collision cost to repair a patrol car.
  • $17,000 — average costs for officer injured in a collision.
  • Quadruple Plays — A large number of collisions result in up to four types of claims against an agency: workers compensation for the injured officer; property damage to the patrol vehicle; property damage for whatever the patrol vehicle hit; and lawsuits for personal injuries and other damages to civilians or other parties involved in the collision.

There is a “gold mine” to justify and pay for training programs – whether it be EVOC, use of force, or another high risk part of your operations – that not all managers are aware of: experience modifiers. Experience modifiers are a handicap factor used in calculating your annual insurance premiums. The modifier is based on previous loss experience (paid claims) in recent years for workers compensation and property and liability policies — each of the two policies has its own modifier.

  • Modifiers are usually on a scale of 0.75 to 1.25.
  • The lower the modifier, the less you pay in insurance.
  • Anything below 1.0 is a discount; above is a penalty.
  • A modifier difference of 0.75 to 1.25 represents a 50 percent swing in what your agency pays. This is big money, especially when multiplied out over several years on two policies!

Visit your risk management staff or insurance company to find out the modifiers for your two policies. Ask them to break down the claims by type. This will give you a good idea of how much you’re spending by claim type. Just asking for a slice of the potential savings from claims and related injury costs will likely fund a good portion or all of your training request. Remember: Training is an investment, not an expense!

Remember also: It’s not insurance — it’s a loan! Insurance isn’t paying your claims. Your agency pays for its claims over the next three to five years after an incident. Reminding and teaching the decision-makers of this fact is critical to your success. Lead up the chain of command!

There are few programs in government that provide even a partial return on investment. Agencies typically overlook reducing insurance claims and, subsequently, the experience modifiers. Yet, reducing them can yield a lot of cash to fund advancements for your agency and its ability to serve the community. It’s a rare opportunity.

Of course, using this type of research and data-driven approach assumes the decision-makers are forward thinking and support the concept of making initial investments to get long-term dividends. As authors Jocko Willink and Leif Babin state in “Extreme Ownership: How U.S. Navy SEALs Lead and Win,” senior leadership wants to see you and your operations succeed; they just need good information to help them make tough decisions.

This is the final article in our Tactical Budgeting series.  You can read Part 1 here and Part 2 here.

Duane Hampton
has over 20 years of law enforcement experience. He is the Chief of Police for the Town of Hillsborough, North Carolina and previously served with the City of Durham, NC as a police lieutenant.  He is a certified law enforcement driving and firearms instructor through N.C. Training & Standards. He instructs in Basic Law Enforcement, Instructor and In-Service training programs. Duane is one three lead instructors who designed and teaches in the N.C. League of Municipalities annual two day “Slower is Faster” police driver safety seminar for police instructors and trainers. He is on the Board of Directors for ALERT International (Association of Law Enforcement Emergency Response Trainers) and is also the southeastern representative for ALERT.

Eric Peterson is the town manager for Hillsborough (NC) and has worked in municipal government since 1987. He’s instructed and coordinated the Hillsborough PD’s annual driver safety training program since 2000, as well as the N.C. League of Municipalities annual “Slower Is Faster” police driving safety seminar for police instructors/trainers (in car and classroom training) across North Carolina since 2013. He is a member of ALERT International. Eric has 21 years of competitive motor sports experience and 10 years of professional instructing experience. In 2014, he won the Sports Car Club of America Pro Solo Championship Series and was the SCCA Solo National Champion in his respective classes. As town manager he has extensive experience in budgeting, performance measurement, and human resources.
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