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Two Large Self Insured Groups Fail – Are There More to Come?


Two Large Self Insured Groups Fall On Hard Times

The Preferred Auto Dealers Self Insured Program of California failed due to the large reduction in the number of dealers and the shrinkage of the surviving car dealers.  Due to the recent credit crunch, the fund was unable to obtain an uncollateralized surety bond,

Picture of People Large Group Self Insured Looking Up

This confirms what I posted in this blog last week on Workers Comp self insureds.   Many Self Insured Groups (SIGs) have failed even when the economy was in much better shape than now.  SlGs often violate the law of large numbers as it applies to risk.

If there are not enough members to spread the risk, the SIG is doomed.  The Preferred Auto Dealers Program had 70 members.  In my opinion, what happened was there were enough members, but the size of the members was reduced.

A more surprising group that will close down operations is the California  Vintners and Independent Producers Self Insurance Program of California – a 30-member self-insured group for the wine-making industry.  I was not aware the winery economy was not doing that well.  A 30-member group would not have been large enough to satisfy the Law of Large Numbers to spread the risk of claims to all members.

Group Of People Self Insured Look Up View

In most states, the Department of Workers Compensation or the Department of Insurance will perform an audit to make sure the files are reserved at appropriate levels.  Unfortunately, as I mentioned last week, the claims from a SIG will be given right back to the employer to handle.  When we have reviewed claims in this type of situation, the claims handling is often sub-par.

I think we will see many more Workers Comp SIGs fail as reinsurance will become very expensive, if not unavailable.  As the economy contracts,  more employers will have to explore the regular market for coverage.  If the employers are bad risks, they may end up in the Risk Pool and pay much higher Workers Compensation premiums.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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