Rancho Mesa's Alyssa Burley and Account Executive Kevin Howard explore self-insured group alternatives.

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Producer/Editor: ⁠⁠⁠Megan Lockhart

Music: "Home" by JHS Pedals, “News Room News” by Spence

transcript

Alyssa Burley: You’re listening to Rancho Mesa’s StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your business thrive.

I’m your host, Alyssa Burley, and today I’m joined by Kevin Howard, Partner with Rancho Mesa. And, we’re going to explore self-insured group alternatives.

Kevin, welcome to the show.

Kevin Howard: Good morning, thanks for having me again, excited.

AB: Now, we have clients throughout the US, but we’re physically here in California.

So, what kind of insurance are most California contractors utilizing for their workers’ comp coverage?

KH: Great question. Well, the fabric of the California’s workers’ compensation landscape, it’s always changing; cyclical, goes up, down. There's typically the guaranteed cost option. Most California-based subcontractors utilize what are called guaranteed cost options for their workers’ compensation needs.

It’s a safe option that allows for business owners to budget for their overhead costs, however, there’s not as much control because you are subject to the ebbs and flows of the marketplace—hard market, soft market, other factors that have nothing to do with your performance. Additionally, with medical inflation and litigated claims on the rise, California is now experiencing a hard market as rate increases in 2025 and more expected in years to come.

AB: So what are other options besides the traditional insurance that contractors can look at?

KH: Yeah, there’s guaranteed cost is the most common option, but there are other options. There's group captive insurance, there's large deductible insurance. Today, we're going to be talking about self-insured groups, which is another great option and could be a really good fit for certain subcontractors in California.

When a contractor is looking for more control over their workers' compensation program, meaning they're saying, "Hey, I'm doing all the blocking and tackling. I'm investing a lot of money into safety, into controls, fall protection equipment, PPE. You know, I want to take advantage of that and have more control of the costs, like the insurance costs.”

In particular, the workers' compensation rates and, you know, ways for me to budget for the future, not just, you know, being subject to the ebbs and flows of the guaranteed cost marketplace. So that's in essence why somebody might choose an alternative workers' compensation program like a SIG, a self-insured group.

AB: Alright, so what’s the financial impact for a contractor if they are interested in joining a SIG?

KH: The financial impact is really based on underwriting criteria similar to a guarantee cost program. We're going to look at five years of data. There's definitely going to be an in-person lost control meeting and they're going to get to know you, which helps, right? Like, let's really get in three-dimensionally and dive into safety and all these different things that you're doing that you can't really see on a supplemental application that's two pages long, right?

And that's what that's what's really exciting about, you know, these alternative workers' compensation programs is we're getting our hands dirty. We're finding ways to look for solutions that build more control. Financially, the self -insured group, it's honestly really similar to a guarantee cost group, as far as how it goes with rate structure, you just have the ability to potentially earn a return premium back and join hands with other contractors that are in a similar group.

AB: So SIGs are good for those companies that are proactive with their safety and risk management because ultimately it's their money on the line. So do these things offer any help or risk management support?

KH: That's an amazing part of this. Yeah, I mean, there's a self-insured group that I'll speak of in particular, CCN. They meet quarterly. They have a council and a safety board. They are sharing ideas and looking for proactive ways to, you know, support each other. Why? Well, they're all part of the same group. Like, they all share the same goal, which is control, keeping losses down, and just finding different ways to be proactive when it comes to safety.

AB: Yeah that’s really important to have all the resources available.

Now, since the individual companies are self-insuring, do they have any input on how this program operates? It kind of sounds like they might.

KH: Yeah, the distinctive feature of SIGs is the active role that members play in the governance of the program. Subcontractors participate in selecting providers, setting policies, and shaping the group's strategies, which is really cool. This cooperative approach ensures that the program aligns with the interests of the members, fostering trust and building transparency.

AB: Yeah so, to join a SIG, a company not only needs to be dedicated to safety—because they’re in this group—but they also need to be committed to the program and be willing to work with other subcontractors that are in their program, right?

KH: That’s right. This self -insured group, the SIG connects subcontractors to a broader network of industry peers. This collaborative environment encourages knowledge exchange, problem solving, and collective negotiations that ultimately contribute to a mutual growth and more resilience.

AB: So when is it a good time to consider joining a SIG?

KH: Joining a SIG makes sense when your estimated premiums reaching $150,000 to close to $1,000,000, you have a competitive loss ratio meaning that you have over five to 10 years, low losses, and your premiums show a very low ratio. That's when you can consider a SIG, and hey, there's nothing wrong with taking a look, learning about it, and I think it's a great idea.

AB: Perfect. So Kevin, if listeners have questions about self-insured groups, what’s the best way to get in touch with you?

KH: Thanks yeah, you can email me khoward@ranchomesa.com or call my direct line (619) 438-6874.

AB: Kevin, thank you for joining me in StudioOne™.

KH: Thank you so much.

AB: Thanks for tuning in to our latest episode produced by StudioOne™. If you enjoyed what you heard, please share this episode and subscribe. For more insights like this, visit us at RanchoMesa.com and subscribe to our weekly newsletter.