Brokers continue to recommend this growing market to thousands of high-risk industry employers throughout Nevada and California representing millions of dollars in annual premiums. Employers who are interested in self-insured groups, or who just want to compare the services and cost of their current workers' compensation policy should diligently research their options by asking all of the questions necessary to gain the proper information about a self-insured group.
The strategy of self-insured groups--commonly referred to as "SIG"--is simple: leverage the collective clout of safety-conscious employers in the same industry to lessen insurance costs for all participants.
In a SIG, members pool their normal premiums to pay claims, loss-control services, general administrative duties, premiums for required insurance and bonds, and any other related expenses. Additionally, the SIG will purchase excess insurance to reduce participants' exposure to catastrophic claims.
Another bonus is that every premium dollar earns interest for the SIG--not for the insurance company. The SIG's goal is to achieve both underwriting and interest profits that can benefit each member in the form of dividends.
The underwriting criteria for SIGs differ in several ways from traditional carriers. In SIGs, the guidelines should be stricter in order to keep out higher risks, and the underwriting criteria are reviewed by SIG members, board members, excess carriers, and the Workers' Compensation Rating Board. A SIG also offers pricing flexibility that makes it easier to establish the correct premium for the exposure, whereas a traditional carrier has a fixed discount in each company that they insure.
In addition to strict underwriting, well-run trusts can keep premiums down by offering members extensive risk-management services that will help contractors run safer businesses. For those preferred risks with favorable loss experience, a SIG can mean a significant reduction in annual insurance costs.
The answer to this question will vary from business to business. It may initially prove to be more economically viable to stay with the State Fund or enroll with a traditional insurance provider. However, it is more than a good price that Brokers should seek when choosing workers' compensation insurance--it's the best overall value.
CHSI manages catastrophic claims similar to most traditional fully insured programs. Our members are covered by different layers of protection that ensure a more financially manageable situation. They are completely protected against all claims arising from an occurrence, whether it is one fatality or fifty. Once the group's insurance coverage meets the premium for an occurrence, our excess insurance provider covers the remaining cost for the life of the claim. Excess insurance with A+ carriers means that members never have to worry about disasters.
Example: A CHSI managed program experienced a fatality in 2002. The cost was easily absorbed by the group and members continued to receive dividends for that year.
At CHSI, our team of professionals design and manage groups so that they are able to absorb unexpected costs through the building of surplus funds and purchasing of excess insurance coverage. Our trained professionals in underwriting, SIG design, and risk-management have successfully developed ways to safely spread the risk among the group to create a more stable environment. In turn, there have been no special assessments of an entire SIG in the 11 year history of CHSI managed programs. However, in the extraordinary case where the group experiences unexpectedly high claims costs, members could be asked to add additional funds to the pool on a proportionate basis to bring surpluses up to desired levels.
Example: A SIG needs to add $100,000 to its pool. A single member who annually pays 2% of the total pool would then have to contribute an additional 2% of this special assessment, or $2,000.
