CRMBC: Myth vs. Fact
Myth #1: If I join a self-insured group and somebody else in the group has a catastrophic claim, I will have to pay more money and it could threaten my business.
Fact:
CRMBC is comprehensively protected against catastrophic injuries by insurance coverage with A-rated excess insurers. The excess carrier covers all costs of all claims that come from a single occurrence, whether it is one claim or 100. CRMBC would pay the initial $500,000, in total, for all claims that came from a catastrophic occurrence, such as an earthquake or violent robbery. The excess insurer would cover all costs after that. With $35 million collected annually by CRMBC, the group can handle a situation like this easily. Catastrophic injuries do not require further funds from group members.
Myth #2: CRMBC is financially risky.
Fact:
CHSI has a team of financial professionals who closely manage the financial health of CRMBC. The Board of Trustees for CRMBC is comprised of business owners and Chief Financial Officers. CHSI produces monthly financial reports to the Board that are on par with Fortune 100 companies. CRMBC is required by California law to set aside claims reserves that are 50% greater than those of insurance companies. Rates are established each year in liaison with a certified actuary to ensure that CRMBC will be able to meet this higher level of security. CRMBC submits annual audited financial statements to the Office of Self-Insurance Plans, Department of Industrial Relations, and operates by the strictest regulations for self-insured groups in the United States.
Myth #3: If another self-insured group falters, CRMBC and my business can be forced to pay for their liabilities.
Fact:
CRMBC has in place tight financial controls with strong supervision. In addition to annual financial audits and requirements for protection against catastrophic losses, self-insured groups in California are required by law to maintain the highest level of security for claim costs in the industry. If a self-insured group were to get into financial difficulty and require additional funding, they would be obtaining that funding from their own members, through a “special assessment,” an increase in rates, or both.
Myth #4: If I join a self-insured group, I could be responsible for claims liabilities after I leave the group.
Fact:
Self-insured group members only share responsibility for their time of membership. If a member decides to leave the group, its claims liabilities stay with the group, just as they would with an insurance company.
Myth #5: Self-insured groups are unrated and therefore they can be a problem for members who need to be with an insurer that has an A.M. Best “A” rating.
Fact:
CRMBC has handled all A-rated paper requirementsfor members. In addition to the A-rated paper of their excess insurance carriers that support the group, the financial controls and strong regulatory relationships ensure financial strength.
Myth #6: Self-insured groups have failed in many states.
Fact:
Self-insured groups have had a better track record than insurance companies in terms of continuance of business. In cases of self insured group failures, the issue has always been an absence of administrative and underwriting integrity by the program administrator. In several cases, regulators also failed to act on financial reports filed by the group and did not take advantage of an opportunity for recovery of the group. CRMBC maintains strict controls in all of its administrative processes, works closely with its actuaries on maintaining rating integrity and has routinely passed its state audits without recommendations for corrections.
