California is noted for leading the way in trends such as fashion, but at least one role that puts the state at or near the head of the list isn’t as attractive.

California businesses face some of the nation’s highest workers’ compensation premium costs. That includes credit unions, even though their risk exposure is less than industries such as construction or manufacturing. So in 2004, the California and Nevada Credit Union Leagues introduced a program aimed at curbing those rates.

Figures from C-U First Ltd, the captive insurance company established by the leagues, show that in 2008, the approach returned $1 million to its credit union policyholders. Since 2004 program enrollees have experienced a 64% premium rate decrease and received $1.7 million in returns.

Each participating credit union’s cost and potential return of that premium is based on individual experience. Participants include CoastHills Federal Credit Union, Orange County’s Credit Union, AltaOne Federal Credit Union, American First Credit Union, Burbank City Federal Credit Union, Christian Community Credit Union, First Financial Credit Union, Fresno County Federal Credit Union, LBS Financial Credit Union, Pacific Marine Credit Union, and the California and Nevada Credit Union Leagues.

At this point, California and Nevada are the only states involved. However, Mary Mauck, division senior vice president for Artex Risk Solutions, which administers the program, said, “We’re certainly open to credit unions in other states.” In fact, she predicted that as the economy recovers, workers’ compensation costs are going to rise. Right now, insurers are facing what they see as a soft market.

“But we expect things will change starting in 2010,” she said. “Usually it starts in California. We are definitely seeing increases in California rates, which should have a direct impact on growth of the program.”

Overall, Mauck indicated, workers’ comp experience tracks pretty much the same among credit unions, although a credit union may from time to time experience heavier losses in a particular year.

Sylvia Fath, California league
senior vice president of business services, said, “The reason it works really well is that each credit union is accountable for its own claims and is accountable to the group as a
whole. So as we meet, we make sure
everybody is performing risk management very diligently.”

The key, she continued, is credit unions need to keep an eye on what’s driving any losses, perhaps ergonomic issues or those that are stress related. Once a year the participating credit unions gather for risk control workshops. In addition to hearing speakers on specific topics, credit unions participate in brainstorming and information sharing sessions.

From the time the program was formed, Fath said, “The idea has been to learn not only from year to year, but to look down the road as to how they can mitigate workers’ comp losses. The difference between workers comp under the captive versus workers comp under a guaranteed cost is that we can spend $100,000 on a premium, but in two or three years if you start to see that your losses are $2,000 or $3,000, you’re going to see a return of part of that premium. With guaranteed cost, if you pay $100,000 to a particular insurance company, you don’t see a dime.”