Self-Insured Groups: Balancing Today’s Premiums Against Tomorrow’s Uncertainty

Workers’ compensation insurance can be an expensive and cumbersome proposition. This has made self-insured workers’ compensation an appealing alternative for some employers. Using a self-insured group to take over workers’ compensation obligations from a traditional insurer can offer lower premiums and increased transparency. However, it also means that employers who are not in the insurance business accept responsibility for the risk and uncertainty that insurers typically shoulder.

Learning Today About Last Year’s Injury

In any policy year, workers may suffer injuries they don’t report until a future policy year. They may also file claims that aren’t resolved for several years. Thus, an insurer won’t know the final cost of a given policy year until several years later. This is especially true of industries with large numbers of reported injuries or particularly expensive injury claims.

Your Competitor’s Liability May Now Be Yours

California is one of several states that impose joint and several liability on the members of a SIG. If one of the members of a group can’t pay its share of workers’ compensation claims, then the other members of the group are obligated to do so. This means that a competitor’s poor safety practices (or poor financial health) could end up becoming your problem.

An insurance company reduces your liability and risk to a single known quantity, your yearly premium. Long-running claims or injuries at other companies become the insurance company’s problem, not yours. This is why deciding between a traditional insurer and a SIG involves a lot more than just comparing annual premiums.