Rising costs of the workers' compensation insurance system have many employers struggling, with some feeling as though they are dancing on quicksand.

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

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

o Control and reduce costs.

o Participate in underwriting profits.

o Earn investment income.

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

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

The good news continues.

Through such a controlled arrangement, performance replaces promises, and SIGs agreeing to long-term commitments have been known to save millions of dollars in costs over the years by staying the course.

However, to make a captive or other risk-sharing arrangements work, brokers and employers must be cognizant that it's absolutely necessary 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 to guide them through the process of identifying and selecting the best options available.

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

Claims Services. While all types of claims can drive up costs of a risk management program, workers' comp claims typically have the greatest impact on both direct and indirect costs. Proven programs are needed that can help reduce medical and indemnity claims, as well as the amount of time injured employees are away from work.

Safety and Loss Control. A critical element of a successful self-insurance vehicle is having knowledge of the hazards of an employer's operation.

A second critical element is action–the development and implementation of a loss control plan that addresses these hazards.

What's also available from the experts?

Captive management services organizations with the required expertise can offer training seminars that help educate employees and assist employers in creating and implementing risk management plans based on their needs as individual captive members. Often, such seminars, customized to meet industry and client needs, are conducted at client locations.

There are many companies with highly qualified people providing these services nationally, and it behooves employers and brokers with clients suffering from workers' comp cost problems to check them out and spread the word on their availability to those they serve. Captive management services firms advertise in insurance, financial services and management publications, via Web sites, direct marketing campaigns, and some also use the electronic media for radio and television advertising.

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

Word gets around. It has spread to California, where a captive has been structured for new franchised auto dealers, with other programs in development in the Golden State and throughout the nation.

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

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

o Safety Services.

These include assistance with safety program design and maintenance, no-cost safety training and seminars, and proactive safety assistance of the self-insured group administrator to reduce injury exposure.

o Claims Management.

Claims management can have several components, such as claims oversight, which might be accomplished by utilizing an on-staff nurse/case manager. It can also include aggressive investigation of questionable claims and the use of provider networks to reduce medical costs.

o Ancillary Services.

One potential ancillary service is pre-employment screening, including previous workers' comp history, risk assessment interviewing, previous employment verification and vehicle records by an independent private investigation firm (where a minimal charge may apply).

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

o Financial Benefits.

Cost benefits can include lower rates (with a one-time initial advance assessment) due to concentrated efforts in increasing workplace safety. Since groups are nonprofit, surplus may be returned to members as dividends and/or payment holidays or rate reductions.

Monthly assessments can be paid in arrears based on actual payroll.

o Administrative Services.

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

Captive management services organizations, like any marketing entity, grow through experience, adding attractive innovations as they go along. One of the unique approaches to bringing solutions to the table that positively affect clients' programs is the long-term partnership that includes delivering services in bundled and unbundled programs.

Specifically, when services and resources are focused on the partnership, this allows an approach to improving the performance of self-insured programs that goes far beyond the basic structuring of alternative insurance programs. Instead, it centers on consistent and meaningful communication with clients.

The goal is to integrate an organization's overall resources in controlling and reducing costs. This involvement is provided from both strategic and tactical levels, and focuses on the direct and indirect costs of the businessowner's program.

The diversity of resources that top-notch captive management services organizations can bring span many disciplines, including actuarial, claims, underwriting, marketing, accounting and risk management. Experts within such organizations can execute and monitor loss portfolio transfers; form, manage and oversee captives; complete reinsurance placements; prepare actuarial analyses and underwriting reviews; and develop the previously described claims management and loss prevention programs.

In addition, some captive management services firms provide national partner networks that encompass specialty disciplines designed for the self-insured industry.

Firms offering captive management services will continue to be enthusiastically greeted by employers and brokers once the word is spread of the plentiful bounty awaiting and available to them.

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

Special Reports /

Self-Insured Groups, Captives Worth Investigation To Cut Comp Costs

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