Frustrated over the soaring cost of workers' compensation coverage, WesCorp FCU and four large California credit unions have joined to form their own self insurance group to cover workers' claims.
The new cooperative is an outgrowth of quarterly meetings WesCorp has been holding with member credit unions' human resources executives who overwhelmingly list the rising cost and lack of availability of workers' comp coverage among their biggest headaches, according to Tom Swedberg, vice president, human resources, for WesCorp.
As a result, a group of four large credit unions-Patelco CU, SAFE CU, AEA (soon to be called Keypoint CU and Travis CU-has joined with WesCorp to form its own Self Insurance Group under California law. The group has applied for approval to operate under the state's Department of Industrial Relations and undergone required state inspections for workplace safety and injury prevention. In addition, the group has obtained the required actuarial projections and hired a third-party in Sacramento to administer the program, which is expected to formally start insuring workers' comp claims for the credit unions sometime next month.
If the program proves successful other California credit unions will be invited to join the group, said Swedberg.
The program was initiated because of widespread problems in workers' compensation coverage in California, which has bankrupted the state's own workers' comp fund and prompted several major insurers to flee the state. As a result premiums charged by the surviving insurers have soared by as much as 50% in recent years.
Up To 30% In Savings
Projections by the group show each credit union saving as much as 30% on annual premiums, according to Swedberg. For WesCorp, that could amount to as much as $180,000 on its $600,000 or so in annual premiums. The other participants expect substantial savings on their $400,000 to $500,000 in annual workers' comp payments.
The program has been tentatively approved by NCUA, which had to sign off on a federal credit union (WesCorp) investing in an insurance company. NCUA in a recent legal opinion letter said the investment is permissible because the insurer is not a for-profit venture but aimed at cost-savings.
State rules will require a minimum capitalization of about $1 million and another $1 million to be deposited with the state as a security bond. Also, the group must have reinsurance to cover large losses.
