Home-improvement stores find stability in workers' comp rates

NORTH BAY – A group of hardware and home-improvement stores in the North Bay, seeking stability in workers’ comp rates, have turned to a growing statewide self-insured model.

With rates expected to increase again next year – by as much as 27 percent – about 15 to 20 stores have joined a statewide network, the Home Improvement Self-Insured Group, which is member-funded and returns remaining dividends to those within the group, in this case home-improvement stores.

The group, founded in 2005, now has about 120 members throughout the state. It recently received state approval to provide coverage to an expanded list of retail stores and expects to see significant growth in the future, said Jim Scanlon, chief executive officer of Scanlon Guerra Burke, a Woodland Hills brokerage that is leading the expansion.

“The group operates at cost structures that are not onerous like an insurance company, and profits return to members,” Mr. Scanlon said. “Really this was born out of a tradition – California workers’ comp premium is either going up or down. It rarely is ever flat.”

And therein lies the appeal to store owners.

“Even though workers’ comp is on regular major carriers, historically I was looking at the long term, and I know rates will probably go up again,” said Will Jopson, owner of Cloverdale Ace Hardware, which has 23 full- and part-time employees. “So I’m in for the long term and looking to control expenses.”

Mr. Scanlon said members are provided with more attention to detail, and the emphasis is on resolving employee claims as fast as possible without jeopardizing safety or rushing legitimate claims.

Lingering claims can cripple an employer with lost productivity, with legal expenses and increased rates just a sampling of issues that can arise. Unsettled claims as well as the number of claims have the potential to increase an employer's experience modification rating, which in turn increases premiums.

As such, having a group of like-minded members, with similar interests and run by a board consisting of four members, creates some stability, said Teri Buchanan, office manager of Coast Hardware in Willits.

“One of the things I like about it is the way things are managed,” she said. “They seem to not waste any time in getting to a doctor and work very closely with the store owner. If there are unseen factors, they just want to get it resolved quickly, whereas a lot of other workers’ comp carriers may drag it out, so you have claims that go on for years. They spend more money up front and close it quicker,” which avoids the costly drawn-out process.

Both Mr. Jopson and Ms. Buchanan said their previous rates weren’t high because of an emphasis on work-place safety, but the stability and level of detail from the group led them to join about a year ago.

There is risk associated with self-insured groups. If claims rise significantly within the group, members will be on the hook.

But Mr. Scanlon said much of the risk is mitigated, and the group is selective so as not to add further variables to the pool of members.

“There is risk because it’s self-insured,” he said, but “we do buy kind of a reinsurance,” that would cover catastrophic events such as an earthquake or a natural disaster. “There is risk but there is reward. All members are approved by the board, and we are very, very selective with whom we let in. But if you can get qualified, it is a very competitive rate.”

The group also utilizes a nurse triage system that determines the severity of an injury, Mr. Scanlon said.

“We have a nursing service that will direct workers, rather than a claims adjuster, and that’s been a huge help,” Mr. Scanlon said. “They can say, ‘This is first aid and go to a clinic, or call 911. Also, they get involved in worker treatment, which has really reduced our litigation rates and provides for injured workers getting back to work faster, which again reduces our claims.”

Mr. Jopson and Ms. Buchanan both said much of the appeal of the group stems from the fact that it is not run for profit, and being self-insured provides for a level of involvement and oversight from businesses themselves.

“When you’re self-insured you’re more aware,” Mr. Jopson said.