What is a Self-Insurance Group?

A group self-insurance program consists of a collection of organizations, homogeneous in nature (auto dealers) who have grouped together for the purpose of insuring Workers Compensation coverage.  Being a member of a self-insurance group (AD COMP) is an alternative to purchasing traditional insurance in the commercial marketplace.  Members make contributions which fund losses and expenses.  The surplus, including investment income, is returned to its members.

Why do Self-Insurance Groups Succeed?

Group self-insurance programs succeed because:

  • The covered employees are the owner/operators of the group.
  • Administrative costs are lower than traditional insurers.
  • Senior management becomes more involved and more committed to the success of the group.
  • Loss control, unique to the specific industry, is mandated.

How do Self-Insurance Groups Succeed?

  • Lower operational costs than commercial insurance company:  SIG's have little of the overhead costs of an insurer.  They typically have no employees and the administration of the group is contracted out to an organization (Administrator) which also provides claims handling.
  • Results-based fee to administrator:  By creating a partnership between the group and the administrator, both benefit from the group exceeding expectations (i.e., have lower losses than expected).
  • Investment income accrues to the members' benefit:  In a SIG, the premium contributions are invested when received.  Because losses are paid over a lengthy period of time, a significant portion of funds is held for several year.  This interest income becomes a part of the member surplus for distribution to members.
  • No bad debts:  Since the group is member-owned, it collects premium contributions in advance of the coverage effective date with strict termination provisions.  Thus, if a member defaults or becomes insolvent, there should still be sufficient funds collected to pay that members losses and expenses.
  • Excess Insurance to cover catastrophic losses:  Losses which may be catastrophic to SIG fall into two categories :  To afford protection against a single catastrophic claim (specific excess) and the total of all claims (aggregate excess).
  • Underwriting standards:  The acceptable standards to join the SIG are significantly higher than commercial insurers.  These standards are more focused on the financial stability of the potential member, the attitude of current management toward employees, the willingness to establish effective return-to-work  plans, and agree to maintain a loss prevention program.
  • Specialized loss control:  AD COMP mandates a loss prevention program designed exclusively for dealers.  The groups homogenous nature gives members the ability to share risk-management knowledge and to devise programs that target safety issues that control cost and reduce frequency.
  • Aggressive claims handling:  Intercare Insurance Services  is the claims administrator for AD-COMP.  They have an excellent staff and a low case load per examiner.  They contact the employer, employee and doctor at the onset of a claim and then actively manage the return-to-work process.  Because different industries have varying rates of severity and frequency of claims, the specialization allows examiners to treat the groups claims in a special way.
  • Appropriate denial and subrogation:  Legitimate claims are handled in a sensitive,  caring manner; questionable claims are aggressively investigated, and claims which are not work-related are denied.  Subrogation opportunities are evaluated and documented for every claim.
  • Committed Board of Trustees:  The Board members provide leadership, must approve all applicants for membership, and are focused on the responsibilities of operating a "wholly-owned insurer"

What does SIG's success mean to a member?

  • Lower cost to fund worker injuries benefits the bottom line.
  • Injured employees receive timely, professional, caring assistance.
  • Relevant, useful loss control prevention.

         A recent analysis of 32 self-insured groups by the firm Watson
         Wyatt provided the following information:

  • Ultimate loss ratios are lower than industry averages.
  • Earned premium to surplus ratio is substantially better (lower) than industry averages.
  • Loss reserve to surplus ratio is substantially better (lower) than industry averages.

         This analysis is indicative of a very healthy SIG marketplace.

Administration

Auto Dealers Compensation of California, Inc. (AD-COMP)  is a California non-profit mutual benefit  corporation.  Your contributions are paid directly to the Auto Dealers Compensation of California, Inc.  and are deposited in a California bank.  A report detailing premium deposits, claims and investment income is prepared on a regular basis by an independent CPA firm and provided to the Board of Trustees  at each meeting.  The Board of Trustees are comprised of five  auto dealers.  The AD-COMP Chairperson is Mike Johnson, Antelope Valley Ford, Lancaster, CA.  For more information call Randy Foster at (800) 936-7837 

Dealer Enrollment

This program is now available to California Franchised Auto Dealers by contacting Dealer Cover at (800) 936-7837.  A specially appointed independent representative in your area will contact you.  

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