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Report on Self Insurance Groups

consider how CDI regulates insurance marketing in California. Examples of marketing oversight tailored to group self insurance may be found in New York and Kentucky.10

Consideration should be given to the New York example, which forbids ―any statements which cannot be measured or verified.‖ Marketing materials in use in California have been observed to contain express or implied promises of ―stability‖ while at the same time offering ―removal from DOI and its oversight.‖

Guarantees of dividends should not be permitted or implied, and OSIP should consider requiring written statements to the effect that past performance is no guarantee of future performance.

The Director should consider requiring that all marketing materials include a standard disclosure about a SIG member’s liability for the claims of all SIG members’ employees in the event of

insolvencies of employers may to insurance.

the SIG and the other not readily appreciate Marketing materials

members. This recommendation is based on the fact that the different consequences of SIG membership compared used in California have sometimes minimized these

differences with statements like, ―If a member decides to leave the stay with the group, just as they would with an insurance company.‖

group, its claims liabilities That statement is true to a

point,

but

a

SIG

is

not

quite

like

an

insurance

company

because

of

the

potential

for

subsequent

assessments if the group is underfunded. Marketing materials do not always member may be assessed for underfunding of claims that arose in the SIG joined. In another example, a marketing statement asserted that members

make it clear that a before the member are only liable for

costs from

incurred in the year of their membership. a surplus year to a deficit year or special

Rule 15477 however, permits assessment of all members as

a transfer of funds two of the options

for making up a agree to assume

shortage in any calendar year. any compensation liability of

Rule 15479 provides that each member any and all other members. Neither of

must these

regulations exempts a member there is a deficit outside the

from an assessment or protects a member’s interest in a surplus if period of the member’s membership. None of the marketing

materials reviewed by CHSWC disclose that guarantee of payments in the event of default

a SIG member might have to pay by a large self insured employer.

a

share

of

SISF’s

CHSWC recommends that the Director consider requiring copies

with

OSIP.

The

New

York

regulations

allow

the

regulator

of to

marketing materials be filed require the submission of

marketing copies for

materials when a violation is suspected. OSIP may prefer to automatically review at its discretion or for review in connection with scheduled audits.

receive

CHSWC further recommends that regulations provide for penalties against both the SIG and the administrator for any false or misleading statements. This recommendation is intended to assure that program administrators are held responsible for the practices which they largely control.

10

12 NYCRR §317.18, KRS 304.50-150

21

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