In most states, SIGs at first must charge the state-mandated rates. However, if their losses and expenses are low, they can pay higher dividends or grant larger premium credits. Another SIG advantages is that they're exempt from residual market loads, or RMLs. In states with large residual markets, RMLs can boost premiums by 15 percent or more. SIGs, however, do have some disadvantages.
Members are liable for the losses of other group members and can be forced to pay assessments.
To limit their risks, SIGs should buy reinsurance for catastrophic losses. Another disadvantage is that SIGs are chartered to operate in only one state. To operate elsewhere, they must requalify in each additional state. And they usually offer only workers' compensation and must offer traditional programs in other lines. Because of disadvantages of self-insured groups, many trade associations are turning to other workers' compensation alternatives.