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What the 2025 WCRI Report Means for Our Members

The Workers Compensation Research Institute (WCRI) is an independent, non-profit organization founded in 1983. It provides objective research on national workers’ compensation trends to inform decisions by policymakers, insurers, employers, and others. Widely cited in legislative and legal settings, WCRI’s 2025 Annual Report features insights from multi-state studies, national benchmarks, and industry collaboration.

The WCRI 2025 Annual Report highlights the most pressing challenges facing employers today—rising costs, complex claims, attorney involvement, and shifting medical trends. For members of our self-insured group, these issues are familiar—and solvable. Here’s how our model turns national problems into local solutions.

1. Managing High-Cost Claims Starts with Early Intervention

WCRI Found: Delayed reporting and complex injuries are strong predictors of costly claims.

What We Do: Our groups collaborate closely with our TPA and claims partners to spot red flags early. Proactive claims management shortens duration allowing claims to be closed faster and lowers the overall cost of claims.

2. Keeping Claims Out of Litigation with Better Service

WCRI Found: Injured workers are more likely to hire attorneys when they feel frustrated or unheard.

What We Do: Our members’ claims are managed with consistent, responsive service by dedicated adjusters familiar with their operations. This personalized approach minimizes friction, prevents unnecessary litigation, and lowers the overall costs of claims, saving our members money.

3. Staying Ahead of Rising Medical Costs

WCRI Found: Inflation is driving medical costs higher across the country.

What We Do: Self-insured groups can pivot faster than traditional carriers. We tailor our medical networks, apply aggressive bill reviews and implement cost controls to protect members from rising medical costs.

4. Customized Cost Containment, Built for Your Industry

WCRI Found: Regulatory strategies vary widely by state, and one-size-fits-all doesn’t work.

What We Do: Our groups focus on the unique needs of our members’ industries. From provider partnerships to return-to-work strategies, we customize every layer of the claims process.

Bottom Line for Members: The WCRI’s research reinforces what we’ve known all along—better outcomes come from early action, local control, and industry-aligned strategies. That’s exactly what you get as a member of one of our self-insured groups.

Self-Insurance isn’t just an alternative. It’s an advantage.

Why Strategic Underwriting Matters

In a recent episode of the Self-Insurance Podcast, Scott Gaffner, Chief Underwriting Officer at PATH, shared expert insights on the critical role of strategic underwriting in self-insured groups. With more than 30 years of experience, Scott highlighted how a proactive approach to underwriting reduces risk and strengthens collaboration—particularly for group members. “Underwriting is at the core of a self-insured group because any member effectively becomes a business partner with everyone else.”

Underwriting as a Foundation

Underwriting is more than a financial exercise—it’s a strategic alignment tool. According to Scott, effective underwriting identifies members who are genuinely committed to workplace safety and collaborative risk management. “They recognize they have skin in the game.”

This mindset encourages members to take shared responsibility for safety practices and claims management—two essential pillars for long-term success.

The Benefits of Self-Insured Groups

While not every business is large enough to self-insure independently, joining a self-insured group can unlock major advantages:

• Lower Cost of Ownership
  “The self-insured group model is the lowest cost of ownership for members,” Scott explained.
• High Standards and Accountability
  “95% of self-insured groups are well run. They self-police effectively and prioritize caring for injured employees.”
• Active Participation
  Unlike traditional insurance, group members are deeply involved in managing their own risks.

Debunking the “Too Risky” Myth

Some brokers caution against self-insurance due to perceived risks. Scott’s response is clear: “It’s too risky not to be in a self-insured group.”

Traditional insurance models may not align with your business’s best interests. Self-insured groups offer regulatory oversight that ensures employers stay accountable and employees receive timely care.

Lessons from Experience

Scott emphasized that the most successful self-insured groups remain mission-driven. “The mission is to take care of injured employees.”

Groups that lose sight of this often struggle. He also warned against focusing solely on upfront pricing: “If someone tries to be the cheapest every year, the model doesn’t work that way. You can’t overpay in a self-insured group because the members own the surplus.”

Understanding the Experience Modification Rate (XMOD)

XMOD reflects your claims history relative to the industry average and is expressed as a percentage. 100% equals the industry average:

• Average = 100%
• Better than average = 99% or less
• Worse risk = 101% or higher

Scott cautioned that some traditional insurers attract clients with unsustainably low rates: “That low premium often isn’t enough to cover losses.”

A strong XMOD lowers premiums over time and enhances your standing with underwriters.

The Power of Collaboration

Group success depends on alignment. Scott stressed that all parties—members, boards, administrators—must be unified around the mission: “Everyone needs to be aligned with the mission.”

Ongoing communication between stakeholders reinforces this alignment and supports better outcomes.

Don’t Wait for a Hard Market

Many operators mistakenly believe that self-insurance is only advantageous during a hard market. Scott disagreed: “That’s an inaccurate way to look at it.”

The benefits of self-insurance—control, cost-efficiency, and employee care—are consistent regardless of market conditions. Self-insurance has consistently performed across all market conditions for more than 108 years in California.

Partner with Experts

At PATH, we help groups and business leaders navigate the complexities of workers’ compensation with confidence. Our team ensures that underwriting is tailored to each member’s unique situation and supports long-term group success. “We underwrite to the current situation.”

Ready to Explore Self-Insurance?

If you’re considering the self-insured group, we’re here to help. Contact us today to learn how strategic underwriting and expert guidance can put you on the PATH to lower costs, safer workplaces, and stronger employee care.

The Basics of Self-Insured Groups

What is a Self-Insured Group?

Self-insured groups, commonly known as “SIGs,” have existed in California for two decades. They serve as an alternative to traditional workers’ comp insurance, whereby employers in the same industry band together to spread risk across their organizations. In doing so, members of a SIG can experience a wide range of benefits.

What are the benefits of joining a SIG?

• Improved Claim Outcomes: SIG members are able to take a more active role and have a greater impact in the handling of their employees’ claims. This means open lines of communication with the claims administrator, faster claim resolution, and more accurate and efficient reserving practices.
• Greater Control: SIGs afford employers a greater degree of flexibility and control in designing a workers’ compensation program that best meets the needs of their business and employees. By customizing their programs and selecting their own vendors, SIGs can achieve lower claims costs, reduced litigation, quicker return-to-work, and better service.
• Cost Savings: When a SIG is operating effectively, it has the potential to generate savings for its members because rates do not include the profit margin that insurance carriers would charge for standard coverage. Short-term cost savings, however, is not a sufficient reason to join a SIG. Savings are never guaranteed.

What does a good SIG member look like?

SIG members come in many different shapes and sizes, but they all have one thing in common: a long-term vision for building a strong workers’ comp program. A good SIG member is involved in the workers’ comp aspect of their business and has ideas for ways it could be improved. It is also critical that SIG members are able to cooperate with each other for their mutual benefit, even though they may be competitors in the field.

SIGs are non-profit member-owned entities that are managed by a board of trustees comprised of members, elected by the members. This places the control and decision- making responsibility for the group with the members. The members of the group by electing a board of trustees from the membership enjoy the benefit of the leadership and decision-making process being in their best interest.

This is different from an insurance company who has a primary duty to act in the best interest of its shareholders and to make a profit. This shareholder-profit motivation is at the heart of every decision an insurance carrier makes including their claims policies and procedures. Most carriers are also publicly traded companies, and their secondary goal is to satisfy the investment analysts which focus on short- term earnings and profitability.

These differences between a member-owned and controlled non-profit versus short-term results and shareholder-profit motivation are a key difference and a main reason why SIGs have stable and competitive rates across all markets and economic conditions. Carriers on the other hand have demonstrated a lack of stable rates, and in the last hard market many carriers stopped writing workers’ comp coverage, left the California market all together, and the term loyalty lost its meaning for existing and long-term policyholders.

The Safeguards of Self-Insured Groups

California strengthened and established a national standard and model regulatory framework for workers’ compensation, self-insurance, and self-insured groups with the enactment of SB863 in 2013. As a result, there have been three significant and major regulatory updates made to the rules governing self-insured groups. Some of the key points of these regulatory enhancements and updates include:

Actuarial Analysis: Establishing an independent actuarial standard for determining the total ultimate exposure of a self-insured group that includes not only the medical and indemnity, but also the ULAE, ALAE and IBNR at the expected ultimate level.

Collateral Deposit: SIGs are required to post with the State collateral equal to the independent actuarial determined total ultimate liability. This amount is reviewed and updated annually and can be satisfied by the SIG’s securing of a surety bond.

Conflict of Interest Provision: A regulation was established requiring independence between the group’s board, administrator, broker, third-party administrator, certified public accountant, and actuary. This creates a strong check-and-balance among the independent advisors and the board of trustees of the groups. This further established a higher degree of integrity and ability to rely on the actions of each of these advisors to act in the best interests of the group and its members.

Solvency Test: A solvency regulation was established that sets forth a formula for each SIGs budgeting and rate setting process annually to ensure boards of trustees are establishing rates based on budgets that fully address operating, reserving and collateral requirements, while additionally covering the medical and indemnity claims requirement at 1.5 times the annual incurred amount. This provides the SIG with an additional excess reserved amount of six additional months of claims costs each year. The budget is self-balancing and resets annually.

Independent Auditors: Regulations were enacted establishing professional standards and requirements for the independent auditors and actuaries to insure a minimum standard of professional certification and credentials. It also has a provision that expressly holds the auditors and actuaries liable for failing to meet these standards of care and professionalism in the preparation and presentation of the annually prepared GAAP audited financial statements and actuarial studies.

Investment Policy: There are strict investment policy standards and regulations that require reserve, collateral, and excess funds to be conservatively invested only in approved investments.

State Regulation: SIGs are highly regulated by the State and also have separate oversight by the California Self- Insurers Security Fund.

• SIGs are required to annually file an employer’s annual report detailing all claims activity for both the current, and ALL historical years.
• SIGs prepare and file an annual budget and rate plan. These are developed using both the actuarial study and meeting the solvency standard regulation.
• SIGs cause to be prepared and submit annually a GAAP audited financial statement independently prepared by a certified public accounting firm.
• SIGs cause to be prepared and submit an annual actuarial study independently prepared by an approved actuarial firm.
• All SIG decisions are made by an elected board of trustees comprised of members of the group. These actions are documented, submitted, and reviewed by the State.

Annual Audits: SIGs are audited annually by OSIPs audit division with a desk audit performedannually and a field audit performed tri-annually.

Self-insurance is an alternative to purchasing a workers’ compensation insurance policy. Employers can choose to self-insure their workers’ compensation liabilities to cover their employees for reasons of cost effectiveness, greater control over their claim’s programs, and increased safety and loss control management. Small and medium-sized businesses have the option of joining with others in the same industry to self-insure their workers’ compensation liability as a Self-Insured Group.

The success of a workers’ compensation self-insurance program is often dependent upon the effectiveness of loss control activities and claims supervision. Most self-insured employers contract with third-party administrators to perform some of these services, while some qualify to handle their own claims administration.

To receive self-insured status, the employer must qualify through an application process, meet specified financial requirements, and be approved by the Director of the Department of Industrial Relations.

California has one of the largest self-insurance programs in the nation and has some of the strongest regulations designed to ensure the system protects both employers and employees. As of January 2022, the state had a total of 25 active SIGs.

Self-Insured Groups in California by the Numbers – 2023

• $7.7 Billion total self-insured payroll.
• 224,991 CA Workers covered by self-insurance.
• 25 CA Groups are active self-insurers.
• 1,863 CA Group members are active self-insurers.
• $236 Million Estimated Claims Reserves.
• $108 Million Medical and Indemnity payments.
• 5,020 Open Workers’ Compensation cases.

Where SIGs Began

In 1994, the California Legislature authorized groups of private employers to form Group Self Insurance programs for their workers compensation liabilities. Open rating was also allowed in 1995, causing rates to decline to historic lows over the next few years.

However, employers did not begin to take advantage of this money saving opportunity until 2002, when the first group workers compensation program was approved. Since then, more employers have decided that taking control over this portion of their responsibilities now and for the future, through group self-insurance, is very cost effective.

While this concept is relatively new to the private sector in California, the public sector has taken advantage of the cost savings for decades by utilizing a joint Powers Authority (JPA). Cities, counties, and various other public entities have pooled their risk and financing to make sure products are available and more affordable. The private sector self-insurance model is based on this very successful historical public track record. Today approximately half of all public entities in the US are participating in some form of insurance risk pooling.

Workers’ Compensation and Self-Insurance in California – A Long Standing History

1913 – California established a workers’ compensation system through passage of the Boynton Act. The act covered three main areas: compensation of injured workers, safety for workers, and provisions for a state insurance fund. The act created an independent Industrial Accident Commission to implement the law.

1914 – State Compensation Insurance Fund, established by the Boynton Act, opens its doors to provide an available market for workers’ compensation insurance and be a model for private insurance carriers. State Fund is considered the insurer of ‘last resort.’

1984 – The California Self-Insurers’ Security Fund (CASISF) was established by the California State Legislature to ensure the continuity of workers’ compensation benefits of self-insured companies that have defaulted on their workers’ compensation obligations – usually due to bankruptcy.

2003 – The California legislature passes the Alternative Security Program (ASP) into law. The California Self-Insurer’s Security Fund ASP allows stand-alone self-Insurers to free up their cash or line of credit, allowing them to invest this capital back into their businesses while the ASP assumes responsibility for their security deposit posting requirement. The ASP provides stand-alone members with a low-cost substitute for collateral with no balance sheet impact.

2012 – The California Legislature enacted groundbreaking workers’ compensation reform with the passage of SB 863, signed into law by Governor Brown. This legislation fundamentally transformed the operations of self-insurance in California. One of the most significant changes was the overhaul of collateral posting requirements, shifting from a simplistic calculation based on a straight factor multiplied by claims reserves to a more sophisticated approach utilizing actuarially determined total loss exposure.

2013 – The implementation of SB 863 has led to a comprehensive adjustment of SIG collateral to align with total liability exposure, significantly enhancing the strength and solvency of groups for their members. Furthermore, robust new requirements for SIG capital solvency, stringent measures to address conflicts of interest among service providers, and independent oversight mechanisms have been established, reinforcing the financial resilience and integrity of SIGs.

2020 – The global COVID-19 pandemic reshaped workplace safety and fundamentally altered the nature of work itself. Over nearly two years, the workers’ compensation system faced unprecedented turmoil, as the predictability of historical claim frequency and severity evaporated. The impact on businesses was staggering; according to Harvard University, a staggering 35.9% of California businesses closed their doors during this crisis, highlighting the widespread disruption and uncertainty that characterized this tumultuous period.

2023 – 7036 California employer self-insure their workers’ compensation exposure covering more than 4.4 million workers – 1 in every 4 California workers – representing a total payroll of $303 billion. Of these, 1,863 employers are members of self-insured groups.

References:

(1) California Self-Insurer’s Security Fund

(2) State of California Department of Industrial Relations

This article describes how Self-Insured Groups operate and how the Joint and Several provisions apply to their members.

First, let us consider what a Self-Insured Group is. A Group is a California mutual benefit non-profit corporation created to provide workers’ compensation coverage to its members. Members of the Group are also the owners of the Group. Members elect fellow members to serve on the Board of Trustees that leads the Group.

Members contribute to the Group for their portion of workers’ compensation coverage based on their payroll size. Joint and Several means, as an owner, each member shares in the benefits and liabilities of the Group.

The Group pays the injured workers’ claims, covers the Group’s operating expenses, and maintains an investment reserve for future claims liabilities.

The State of California regulates Groups through the Office of Self Insurance Plans. Regulations enacted in 2013 require Groups to be fiscally responsible. Groups establish appropriate rates and operate within budgets that meet regulatory standards. Regulations provide numerous protections to ensure Groups are fiscally sound, including:

• An annual GAAP audit performed by an independent CPA.
• An annual independent actuarial study to determine total claims liabilities and proper funding levels.
• Establishing annual operating budgets that cover the Group’s current claims liabilities and operating expenses for twelve months plus an additional six months of claims expenses.
• Finally, a Group must always operate with a positive net equity. Positive net equity means the Group has more assets than liabilities.

A Group is a member-owned non-profit, so when there is a surplus of funds in the Group, each member owns a portion of these surplus funds. Similarly, if the Group does not collect enough contributions to cover the claims liabilities for a specific year, the members will make up the shortfall.

The Joint and Several provisions typically only come into play if a Group ceases operation. The Group then returns excess funds to or collects shortfalls from the members. These adjustments apply only to the year(s) a member was in the group.