LETTERS
Ready to Run
Having just completed my two terms on the Irvine Chamber of Commerce’s board of directors, I already knew the impact of the OCBJ. But after your July 19 OC Insider column, I realize even more how well read your business journal is.
My phone was ringing off the hook all day because of your “Mears Turns on Agran” item.
With Councilmember Mears choosing not to run for the Irvine City Council, I will.
However, my immediate campaign is to bring business leaders from across the U.S. to Athens to support the Olympic Games.
Mitch Goldstone
Chief executive, president, 30 Minute Photos Etc.
Irvine
Workers’ Comp
Gov. Arnold Schwarzenegger’s overhaul of the workers’ compensation system has the potential to finally bring some degree of relief to California businesses. It’s a lot more than anyone else has done in recent memory.
However, the incredible complexity of the problems with workers’ comp defies quick fixes, and the long-term view remains clouded with uncertainties.
There are no guarantees that insurers will lower premiums and no immediate plans to give anyone the authority to force them to. So California’s current workers’ comp system will remain a heavy burden to businesses for some time.
That’s why a growing number of companies is following a new trend: joining other members of their industry and striking out to form their own self-insurance groups.
These miniature workers’ compensation organizations strive to take control of the highly unpredictable costs of traditional insurance by eliminating one of the factors that keeps premiums high,the profit motive of commercial insurance companies.
Rates are set by a board of directors drawn from the self-insured group’s own member-companies. This enhances accountability among members, sharpening their determination to keep rates low by making safety and loss-prevention a priority.
But perhaps the best advantage of self-insurance is where the member premiums go: nowhere. Money paid by members remains under the control of the self-insured group. Retained earnings can accrue and either be used to lower rate payments or be redistributed to members.
A small group of new car dealerships pioneered private group self-insurance in 2002, forming Auto Dealers Compensation of California Inc. Today, members of the group estimate that the total dollars saved by forming their own self-insurance pool has exceeded seven figures.
Of course, there is a flip side. If claims stack up and contributions can’t cover costs, then members will have to make additional contributions. Also, members are liable for one another.
In other words, this isn’t a process that you can set on cruise control and forget about. If you want that luxury, then you should keep paying higher premiums with an established insurance carrier.
Gregory L. Trout
Principal
Bickmore Risk Services
Sacramento
