Workers’ Compensation rates continue their ascent over the past 2-3 years. If you are operating in a desirable business with a reasonable loss rate, this could mean an increase of 3-8% annually. If you are in a tougher class, with more losses, this could be more like 8-15% with some cases going higher. These increases are related to at least two factors in this bloggers humble insurance opinion. Firstly, Medical Inflation – as with health insurance, the costs of work comp medical claims are going up faster than most industry experts and underwriters predicted. That leads to the second reason….the soft market. Increased claim costs, along with premiums far under where they should be, results in a perfect storm. This perfect storm is really not perfect for the insurance buyer, in fact it can blow operating budgets out of the water.
The majority of buyers of Workers’ Compensation in the state are too small to self insure individually. It would be cost prohibitive and not allowed under the guidelines set forth by the state. Another option to help counteract these rate increases and give buyers another choice is the ever growing Self Insurance Group, or SIG. The self-insured funds allow employers from the same industry to pool their resources to fund their own Workers’ Compensation coverage. These programs are regulated by the Michigan Workers’ Compensation Agency (WCA), which is an agency within DLEG.
Currently, there are 34 group self-insured funds in the state, covering thousands of employees. WCA approved creation of these funds and monitors their operations. The agency also approves the premiums they charge, and the dividend distributions they make. These groups have been steadily growing over the past few years, mirroring the increases seen in the conventional work comp marketplace.
Some quick info pieces as you consider this option:
- Membership is often required within a sponsoring organization. This can cost as little as $500 annually, or several thousand depending on the group
- Dividends are paid after a delay of several months up to a year, and are subject to group results
- Normally the Groups are single state, you cannot have operations domiciled outside of your home state
- Access is limited to appointed agents….your current agent may not have access
With rates going up, options can be a good thing. Has your agent discussed SIGS with you?
Joe Buick, CIC, CRM