Basics of GSI: Advantages

Control over membership – This allows the group to hand pick homogenous members that are a good risk, thus, avoiding price increases caused by adverse selection and exposures in unrelated classes of business. Underwriting is very selective, and is based on loss experience and other criteria.

Reduction of moral and morale hazards – Members will “self police” more in a group than they would if being insured by a standard insurance company. Loss control becomes more of a priority when the cost of not following a program is borne directly by the member.

Pooled peer resources – A homogeneous Group Self Insurance Program gives the members the advantage of specific loss control resources, support, and service that is specific to the group’s industry. 

Rate stabilization – By having dedicated members, a group can ride out hard and soft markets by keeping costs, and thus, contributions stable throughout these cycles.  Exposure is narrowed to one common industry, therefore, not allowing other industry risks to adversely affect costs for the group members.

A reduction in cost – The main goal is to utilize all of the above to achieve a better loss experience than companies in the general insurance market, and thus, receive dividends and/or enjoy costs that are lower than the standard market. Costs are also reduced significantly because members are no longer paying the ‘profit’ load charged by standard insurance companies.

Regulatory oversight - Each State’s Workers’ Compensation Board approves and oversees all group self insurance programs assuring proper group formation. They also conduct annual financial reviews to promote group stability.