How Do Self-Insurance Groups Work?
A self-insurance group enables employers to assume a major portion of their risk and provides group purchasing power for excess insurance to cover losses incurred individually or collectively in excess of a specified amount. Members of self-insurance groups pay a contribution to the group based on the exposures, classification codes, payroll, experience modifications and rates developed by the group or the state workers’ compensation rate making bureau (depending on the state). Contributions paid by members are used to pay covered losses, claims administration and costs associated with the management of the group, such as loss control, legal accounting, actuarial, and excess insurance. Surplus from both the claims fund and the administrative expense fund can be returned to group members on a pro rate share basis the form of dividends of by the reduction of future rates. Many costs associated with traditional workers’ compensation insurance, such as premium taxes (in most states) and re
