Selecting an Excess Insurer

As agents to the self-insurer the procurers of excess insurance have a fiduciary duty to the plan to get the best coverage for each plan from the best provider. As stop-loss is fundamental to most companies ability to self-insure (any large claims that were not recoverable could bankrupt the company), the self-insurer should ensure that the insurance carrier being selected meets the following requirements:

1. Security A self-insurer will need to be assured that the company will still be in existence when claims need to be paid. A.M. Best provides ratings for each insurance company with A+ being the highest category. If a self-insurer is unsure of a company's credentials they should obtain outside advice.

2. Service A self-insurer will need to be assured that the excess insurer responds quickly, efficiently and responsibly to any claims so that the company is not left having to fund them itself.

3. Competitiveness A self-insurer will need to be assured that an insurer's prices are not out of line with the market or excessively high. A broker or Third Party Administrator should provide a company with alternative quotes at the beginning and at each renewal but unless there is a significant price differential (and all other things being equal) changing the excess insurer should be resisted. Insurers normally take into account prior loss experience and add a discount if the insured has been a loyal customer. Moving to another insurer for a short-term gain can often turn out to be counter-productive.

4. Responsive If experience is good and a bank of premium is developed a self-insurer will want to be assured that the excess insurer will take this into account in calculating future premiums in order that the company will benefit from reduced premiums.