As a Vision Sponsor of the MSBO Leadership Institute for 2012-13, SET SEG has provided the following article.
Over the last decade, many districts around the state began exploring the concept of consolidating services as an option for streamlining operations and saving money. This was not a new concept to some. Throughout the history of K-12 education in Michigan, there are many examples of successful coalitions and consolidations arising from schools facing hard times, and one example is SET SEG.
Though established in different years, both the SEG Self-Insurer Workers’ Compensation Fund and the MASB-SEG Property/Casualty Pool were born out of similar circumstances; a crisis in school districts having difficulty getting access to affordable, comprehensive insurance coverage. During that particular time, commercial insurance carriers did not view public schools as a desirable market. The few carriers willing to work with schools charged sky-high rates for coverage. As a result, educational leaders from across the state worked together to find a solution. They ultimately designed a self-insured, risk management pool that consolidated insurance services and ensured budget predictability due to stable, affordable rates and claim reduction strategies specifically structured for Michigan schools.
In addition to stable rates, members share in investment income earned by the programs. This year, WC Fund members will receive $9 million in contribution reductions. P/C Pool members will receive $ 6.5 million in net asset returns. Stable claims and expenses, solid investment income and steady reinsurance costs all factor into the ability to establish consistent rates of return for Fund and Pool members. Additionally, partnering with an actuary ensures that accurate rates are established, which helps minimize premium increases from year-to-year.
The Fund takes a cautiously optimistic approach to investment planning, a strategy that has yielded successful results and strong returns. The Fund’s Board of Directors works with an actuary to determine the amount of accumulated assets that can be applied to reduce the contributions of members on a yearly basis, and that amount is then approved by the Michigan Workers’ Compensation Agency, which oversees all self-funded workers’ compensation programs in the state. To date, the Fund has issued more than $209 million in contribution returns.
The Pool is committed to a philosophy of maintaining stable rates to help members budget accurately. To keep rates predictable over time, the Pool relies on solid claims handling and strong risk management. Rates are actuarially developed to generate adequate premium to cover the Pool’s claims and expenses while contributing to a sound equity balance that allows for the generation of investment income. This income stream has helped the Pool share more than $111 million in total net asset returns.
Both of these approaches differ greatly from that of commercial insurers, whose premiums can fluctuate over the course of time. At the district level, these fluctuations can make budgeting for insurance costs difficult to determine from year to year.
More than 25 years ago, schools came together to solve their insurance issues. Even as the trends of the commercial insurance market fluctuate, the Pool and the Fund exist to provide stable, essential protections for Michigan schools.