Majority Have Little or No Knowledge of How Self-Insured Groups Work

by

Hale Johnston

EMPLOYERS latest SIG-related poll results come at a time of continued financial challenges for some large SIGs and their members around the country. In California, a workers compensation SIG for restaurants, golf courses and country clubs recently announced a $42 million assessment on its member businesses to make up for the group s insufficient reserves. The assessment means costs of tens of thousands of dollars or more to the member companies, including many that are former members. And recently a health-care industry SIG also announced an assessment to its members which was necessary to comply with California financial standards and to shore up a $25 million reserve deficit.

Four out of ten small business decision-makers incorrectly believe that SIG members are not financially responsible for the claims of each of the group s other member companies, according to the latest EMPLOYERS Small Business Opinion Poll. This lack of SIG knowledge is not limited to the general small business population. Thirty-nine percent of small businesses who are currently or were part of a SIG incorrectly believe SIG members are not financially responsible for the workers compensation claims of each of the other companies in their SIG, not just their own businesses.

EMPLOYERS Small Business Opinion Poll Snapshot:

73 percent have little or no knowledge of how SIGs work

40 percent of all small business decision-makers polled don t realize SIG members are financially responsible for each of the other member company claims

39 percent of current and former SIG members don t realize they are responsible for claims of each of the other member companies

31 percent believe saving money on annual premiums outweighs the financial risk of a SIG failure

25 percent incorrectly believe that their claim liability ceases when they leave a SIG

Selecting Workers\’ Compensation Coverage

When selecting a workers\’ compensation insurance carrier, price logically serves as a deciding factor and is certainly important. However, it\’s also important for businesses to consider long-term cost savings that can be achieved through value-added programs such as loss control, anti-fraud and managed care programs that are offered by private insurance carriers.

Following are questions businesses should ask if they are already members of or are considering leaving self-insured groups.

Nine Questions Businesses Should Ask Their Self-Insured Group Administrator:

1. How well funded is the self-insured group?

2. How many claims have occurred while my company has been a member?

3. What is the expected lifetime cost of each of these claims?

4. What does joint and several liability mean to my business?

5. What is my company s exposure if another member of the self-insured group has a claim?

6. Can a claimant sue my company for the full cost of a claim?

7. What liabilities does my company have if I leave the self-insured group?

8. What are the legal requirements of leaving a self-insured group?

9. Will I need to re insure any costs related to claims that occurred while I was part of the self-insured group?

About the Small Business Opinion Poll

The study commissioned by EMPLOYERS surveyed 501 owners or managers of small businesses with 1-99 full-time employees. Data was collected through telephone interviews during the period May 9 May 17, 2012 at the 95 percent confidence level. The sample is stratified across business size and industry grouping, including manufacturing/construction, transportation/ communication, wholesale/retail, financial services, or personal/professional services businesses. The survey was conducted by ORC International through its Small Business CARAVAN.

Hale Johnston is Senior Vice President, Regional Manager of the Pacific Region for EMPLOYERS . Additional information can be found at

employers.com

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