Back Self Insured Groups

I need some advice on Self Insurance Groups (SIG). I have recently had to compete with them on work comp and package policies for restaurants. I've gone onto their web site and check them out and they sound legitimate. It is my understanding that they are not regulated the same as an insurance company. Is that true? Do I need to start doing business with SIG companies to stay competitive? What are the positives and negatives with this type of group? Thank you in advance for your input.

Our company specializes in Workers Compensation. And we are heavily involved in litigation against the NYS Trusts. Give me a call and we can talk about it. Michael Paone, Vice-President Sales/Marketing CompAudit Services 266 Harristown Road Suite 106 Glen Rock, NJ 07452 800-285-1948 ext. 3008 Fax 201-689-4044 mpaone@compauditusa.com www.compauditusa.com

You did not specify in which state you are doing business. Most self-insured workers compensation groups operate on a single state basis. As a state mandated insurance coverage, workers compensation self-insurance groups typically have some degree of regulation by the applicable state insurance department. In Michigan, for example, the state requires each workers' compensation self-insurance group to annually apply for permission to operate. As part of this process the group submits their financial data. The state also requires there to be adequate excess insurance in place from an approved company, both on a specific and aggregate (or stop-loss) basis. Every state does the same thing on a more or less comprehensive basis when workers compensation is involved. Self-insurance pools are less regulated when other coverages are involved. There are many very well run pools and RRG's out there (I work for one). There are also some very poorly financed and shakey programs being marketed. Before becoming involved in marketing a pool or RRG program you would be smart to do your homework.

I'm in the state of California. I will take your advice and do the homework. Thank you for responding.

Let's see... a potentially shaky RRG and an E & O program that says they won't cover these types of programs. Doesn't sound like a swift career move to me. I'd check with your E & O carrier to confirm coverage! Swymmer

Self-Insured groups are permitted in many states (35 or so) and are a viable option for many small to medium sized employers. There are pros and cons to the group model, both for the agent and for the employer. Before you make a decision one way or the other it's important to do your homework so that you can make an informed decision. For the employer, a self-insured group can provide long term availability of insurance coverage at a stable and affordable price. Many times, premiums developed by group self-insurers are more competitive than those available in the private market - especially during hard market cycles. Groups are usually industry-specific so the coverages are typically tailored to the needs of that particular industry. Likewise, loss control and safety programs are designed for the unique needs of the members. Most importantly, the group is not motivated by a profit incentive, therefore positive underwriting results are often returned to the group members in the form of reduced rates or even dividends. The downsides of this model are that groups typically require a multi-year commitment from the employer when they initially join. Group members are joint and severally liable to the group and the other members. If the group does not perform well, the member can be assessed to make up for any deficit. Finally, self-insured groups cannot cover exposures in any state but the one where they are domiciled. For example, if you have an employer with operations in CA and NV and they join a CA self-insurance group, they cannot cover their NV exposures in that group. The NV operations would need to be covered separately. From an agency standpoint, you can bring a long-term solution to a client outside of the usual standard market programs. Groups often allow outside agents to participate in the program and offer compensation in the form of fees or commissions for any members they bring to the group. The only word of caution to doing so is the possibility of competition. Very often groups are run by agents or group administrators who may be in competition with your agency. Before you bring the group option to your client, you should secure a non-compete agreement with the group's agents & administrator that prohibits any of the parties from soliciting your client directly. Most reputable groups will have such agreements in place already. When considering whether or not to join a group, employers and their agents must thoroughly research the group, the organizations running the program, and the service providers. In particular, pay attention to the operating results of the group for the last few years. You need to be sure that the group is operating stably and profitably before making the decision to join. Like insurance companies, not all groups are the same, so make sure you do your homework. My company specializes in self-insurance, both individual and group risks. If you would like to discuss this further, please fee free to contact me. Vince Capaldi Vice President Self-Funded Alternatives Langhorne, PA 215-860-7444

I would not bother with a SIG for restaurants. Alternative risk programs (Sig's, captives, etc) work best for industries where insurance options can be limited like trucking, heavy construction, healthcare, etc. As far as I know... Restaurants are a targeted class of business for almost every major carrier in CA. A SIG may be able to come in and undercut the market for a moment but I cannot picture them being a long term solution for restuarants. Why would a restaurant want to deal with getting reviewed financials ($3000-8000 per year) and exposing themselves to Joint & Several Liablity when you can get a very competitive rate from dozens of carriers? I know I would not want to be sharing risks in an industry where the average life span of a restaurant concept is less than 5 years. Selling against a SIG is a lot easier than selling a SIG in the current soft market.

Thank you all for your responses. I have to agree with "volstrike3" in the case of restaurants. I'm understanding that there is a place for SIG's but this is not one of them. Good news is that with this forum I was able to talk to the insured about the pros and cons with their current carrier. I was able to obtain competitive quotes and get them to move. I'm hoping to get into larger construction accounts, maybe there will be the need to seek out good SIG's and Risk Retention Groups. Thanks again for the help.