4 Strategies for Long-Term Stability in Self-Insured Groups

Self-insurance continues to be a cost-effective business option for employers when funding their insurance needs. Optimized risk control and claims services can help reduce accidents, ultimately helping to control the costs of insurance for members. Profitable groups, upon the approval of regulators, can also return surplus or dividends back to members, which can then be reinvested in local communities.

“A self-insured group can stand out in the workers’ compensation marketplace by consistently applying high internal standards,” said Brad Ogle, Vice President, Excess Workers’ Compensation Underwriting at Safety National. “Embedding these standards not only strengthens the group’s reputation, but also builds lasting value and competitive distinction in the marketplace.”

Here are four best practice strategies that self-insured groups can incorporate into their own programs.

1. Maintain a strong foundation through a proactive and detailed plan of operation.

A self-insured group’s long-term success depends on a living plan of operation that is regularly updated to ensure compliance, financial strength, and member value. This foundation is strengthened by:

• Annual Evaluation – Reassessing feasibility, underwriting, and service providers against current conditions.
• Up-to-Date Records – Keeping membership, governance, financials, actuarial reports, and agreements current and accurate.
• Governance and Accountability – Establishing policies for transparency, disclosure, audits, and regulatory compliance.
• Member Value – Reinforcing the group’s mission through effective cost control, claims handling, and reinvestment of surplus/dividends.

2. Hold service providers to high standards and results.

When groups select service providers, appropriate standards of experience and performance need to be developed and implemented. In some jurisdictions, service providers must first be approved by the regulators before a group can contract with that service provider. As such, it is important for groups to think about the standards of operation and service offered by a service provider when making decisions as to which vendors to use. Some basic standards that a group should consider during an internal audit of a service provider include:

• A sense of urgency when interacting and performing group business with group members, the board of trustees, and state regulators.
• Necessary values, successful experience, and attention to quality and detail that will allow the group to achieve its stated purpose and daily goals.
• Compliance adherence with state statutes and regulations under which the group operates.

3. Prioritize regulatory relationships.

Regulatory issues can be diverse in scope and may seriously impact a group’s function, so it is important that self-insured groups foster a relationship with appropriate regulatory authorities as soon as possible after formation. When the group has established a professional business relationship with a regulatory authority, a better, more thoughtful and open dialogue may be developed. This can include more involvement with the state self-insurance association, attending a self-insurance conference, or sitting on a regulatory subcommittee for self-insurance.

4. Understand the group’s financial solvency.

Financial solvency is the most critical factor in a group’s long-term success and regulatory standing. A disciplined solvency framework assures regulators, builds member confidence, and positions the group for long-term sustainability. To protect stability, groups should:

• Meet capital and compliance requirements through regular regulatory exams and adherence to state statutes.
• Leverage experienced actuaries to evaluate liabilities, funding needs, and both gross and net loss trends.
• Build in risk margins to strengthen surplus adequacy and avoid underfunding.
• Apply consistent pricing models so all members are rated fairly using actuarial assumptions.
• Control operating expenses and reassess if expense ratios exceed 35%.
• Conduct annual internal audits to ensure transparency, accountability, and financial stability.