Rising costs of the workers' compensation insurance system havemany employers struggling, with some feeling as though they aredancing on quicksand.

A solution which has yet to be tried by some employers and thebrokers that serve them is to consider joining self-insured groupsor setting up captives.

For those who go the self-insurance workers' comp route, itoffers the opportunity to:

o Control and reduce costs.

o Participate in underwriting profits.

o Earn investment income.

Also of major significance, being self-insured enablesbusinessowners to have a say in their insurance needs and theirwork force's destiny.

In capsule, if you own it, you control it!

The good news continues.

Through such a controlled arrangement, performance replacespromises, and SIGs agreeing to long-term commitments have beenknown to save millions of dollars in costs over the years bystaying the course.

However, to make a captive or other risk-sharing arrangementswork, brokers and employers must be cognizant that it's absolutelynecessary to find the right strategic partner with the know-how,experience and track record to rescue them from escalating workers'comp costs and related problems. Point-blank, experts are needed toguide them through the process of identifying and selecting thebest options available.

Certainly, the major challenges in workers' comp are significantand therefore require thorough investigation and ongoing duediligence. They include:

Claims Services. While all types of claims can drive up costs ofa risk management program, workers' comp claims typically have thegreatest impact on both direct and indirect costs. Proven programsare needed that can help reduce medical and indemnity claims, aswell as the amount of time injured employees are away fromwork.

Safety and Loss Control. A critical element of a successfulself-insurance vehicle is having knowledge of the hazards of anemployer's operation.

A second critical element is action–the development andimplementation of a loss control plan that addresses thesehazards.

What's also available from the experts?

Captive management services organizations with the requiredexpertise can offer training seminars that help educate employeesand assist employers in creating and implementing risk managementplans based on their needs as individual captive members. Often,such seminars, customized to meet industry and client needs, areconducted at client locations.

There are many companies with highly qualified people providingthese services nationally, and it behooves employers and brokerswith clients suffering from workers' comp cost problems to checkthem out and spread the word on their availability to those theyserve. Captive management services firms advertise in insurance,financial services and management publications, via Web sites,direct marketing campaigns, and some also use the electronic mediafor radio and television advertising.

An example of what can be accomplished through workers' compself-insurance is found in Nevada, where the SIGs administered showannual cost savings of between 15 percent and 65 percent,contributing to an annual membership growth of between 25 percentand 50 percent.

Word gets around. It has spread to California, where a captivehas been structured for new franchised auto dealers, with otherprograms in development in the Golden State and throughout thenation.

For workers' comp, the captive and SIG wave is building.

What's available under the SIG umbrella vividly demonstrates theadvantages of group membership, with the best self-insured programsproviding some of the following services and benefits:

o Safety Services.

These include assistance with safety program design andmaintenance, no-cost safety training and seminars, and proactivesafety assistance of the self-insured group administrator to reduceinjury exposure.

o Claims Management.

Claims management can have several components, such as claimsoversight, which might be accomplished by utilizing an on-staffnurse/case manager. It can also include aggressive investigation ofquestionable claims and the use of provider networks to reducemedical costs.

o Ancillary Services.

One potential ancillary service is pre-employment screening,including previous workers' comp history, risk assessmentinterviewing, previous employment verification and vehicle recordsby an independent private investigation firm (where a minimalcharge may apply).

Also beneficial are: employer representation in the appealsprocess of a claim by the group's legal counsel; active boards oftrustees consisting of member employers with risk management,claims, finance and underwriting committees to oversee the group'soperations; group operation guidance from their legal counsel;strict underwriting to determine the best candidates formembership.

o Financial Benefits.

Cost benefits can include lower rates (with a one-time initialadvance assessment) due to concentrated efforts in increasingworkplace safety. Since groups are nonprofit, surplus may bereturned to members as dividends and/or payment holidays or ratereductions.

Monthly assessments can be paid in arrears based on actualpayroll.

o Administrative Services.

Such services include the provision of certificates of coverageas requested, assistance in separating personnel issues from claimsissues, and other day-to-day member services.

Captive management services organizations, like any marketingentity, grow through experience, adding attractive innovations asthey go along. One of the unique approaches to bringing solutionsto the table that positively affect clients' programs is thelong-term partnership that includes delivering services in bundledand unbundled programs.

Specifically, when services and resources are focused on thepartnership, this allows an approach to improving the performanceof self-insured programs that goes far beyond the basic structuringof alternative insurance programs. Instead, it centers onconsistent and meaningful communication with clients.

The goal is to integrate an organization's overall resources incontrolling and reducing costs. This involvement is provided fromboth strategic and tactical levels, and focuses on the direct andindirect costs of the businessowner's program.

The diversity of resources that top-notch captive managementservices organizations can bring span many disciplines, includingactuarial, claims, underwriting, marketing, accounting and riskmanagement. Experts within such organizations can execute andmonitor loss portfolio transfers; form, manage and overseecaptives; complete reinsurance placements; prepare actuarialanalyses and underwriting reviews; and develop the previouslydescribed claims management and loss prevention programs.

In addition, some captive management services firms providenational partner networks that encompass specialty disciplinesdesigned for the self-insured industry.

Firms offering captive management services will continue to beenthusiastically greeted by employers and brokers once the word isspread of the plentiful bounty awaiting and available to them.

And finally, businessowners won't feel as though they're dancingon quicksand.