Catalyzing Collective Control: Ruben Medina on How Group Self-Insurance Transforms Risk Management

In this insightful episode of the Self-Insurance Podcast, Ruben Medina, a seasoned insurance specialist with over three decades of experience, shares invaluable advice for restaurant owners and brokers navigating the complexities of workers' compensation in California. 

Medina discusses the substantial benefits of group self-insurance, emphasizing its potential for significant cost savings and enhanced control over insurance outcomes. 

He advocates for self-insurance as a strategic choice that enables businesses to manage risks collectively with like-minded partners, ensuring stability and financial benefits. 

This podcast is a must-listen for those in the hospitality industry looking to make informed decisions about managing their workers' compensation needs more effectively.

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Transcript

 Welcome to the Self-Insurance Podcast brought to you by CRMBC. Every two weeks, we are interviewing restaurant owners, industry experts, and brokers to explore the world of self-insurance for the California restaurant industry.



 [MUSIC]



 Hello and welcome to the Self-Insured Podcast. Today, I'm joined by Ruben Medina, the Principal of AccraSure Southwest. Ruben, thank you for joining me today. You're welcome. Thanks for having me. Ruben, you've been in insurance for 32 years, and your office is in Ontario, California. Give us a little background about how you got into insurance and what brought you to where you are today. Yeah, it's actually an interesting story, I guess. I've told this a few times before, but I've only had two jobs before. I was an athlete trying to make an Olympic team, and I went right into insurance at a very young age. My father owned an insurance agency called Cumbre Insurance Services, and he was growing at the time, needed producers.



 Because of my success as an athlete, and the fact that I was a young father at the time, and had to feed a baby,



 and growing my family, he suggested that I try insurance and be a producer, or a salesperson for his agency, given my contacts and my experience traveling that episode. Wasn't all that interesting.



 Wasn't too exciting to me at the time, but like I said, I had to start making some money, make some career decisions, so I gave it a try. I started in personal lines insurance, and about maybe six months after being licensed and learning about insurance, I got a phone call from a gentleman who had been our client on the personal line site,



 telling me that he was confused about his policies. He had multiple policies with us, and so this was back when we had file cabinets. I had to open up a file cabinet, and I saw all these Manila folders with his name on them, and I realized he owns tons of properties, and I was confused. So I called him back and I said, "Hey, listen, let me organize this for you, "and I'll call you back." I'm just an organized person, right? So I went in and did that, and I learned about multi-policy discounts, and I kind of consolidate all of his policies with his permission, of course, with one carrier, and that went really well. I called him back and I said, "Hey, listen, I organized this for you," and he said, "Oh, what do you got?" And I said, "I'll tell you what, I'll drive down." I just want to get it on the office, to be honest with you, because he was killing me being in there all the time. I said, "You're in my old neighborhood in East Los Angeles. "I'll drive down there and be over with you." He says, "Okay, that's great." So I go down there. He's so impressed by all of this. He says, "You know, nobody's ever taken the time "to do this for me, and we appreciate it." And as I was leaving, he says, "Hey, Reuben, listen, you don't even think "about workers' comp insurance." And I said, "I'm brand new in this world, "but my father has authored legislation "helping business owners in California "parting to workers' comp and experience modifications." He's an expert. I had a lot of great people around me. What do you got? And he says, "I own five McDonald's restaurants, "and I need help with an experience mod, "and I'm with the state fund." And I said, "Great." So, again, not knowing anything, with some help, gathered the right information,



 placed his insurance, and side note, that same client ultimately became a mentor of mine, and grew to be one of the largest McDonald's franchisees in all of California over time. So those five stores he owned in Los Angeles turned into about 35 stores, collectively as a family, and they are a long-time member of the CRMBC since 2005, since its inception, and they're very happy in the program.



 - Yes, and we're very thankful for that. They're a great member of ours, and this goes to show the way that you started out in insurance, and the behavior that you've continued all this time, which is not just selling a commodity, you are finding business solutions for your restaurant owners, or your clients, but for ours, it's restaurant owners, because we're a restaurant self-insured group. So one of the things that I wanted to talk to you about today on the podcast is, with all of your expertise, and all of the tools that are available to you, you are a true believer in workers' comp self-insurance. And so can you tell me a little bit about why? Why do you believe in it? I know I believe in it, but I wanna know your perspective. - Yeah, absolutely. So I've been doing this a long time, as I've mentioned, and I'm a workers' comp specialist. I insure restaurants, as well as other areas in the hospitality world, right? I do a lot of Indian casinos and tribes and things like that, but they all kind of have the same issues, right? Especially here in California. I really believe in the concept of group self-insurance, because in a group self-insurance scenario, much like the CRMBC, if it's run properly, could be a huge benefit to the business owner.



 Because in traditional self-insurance, doing it on your own, there's a lot involved with that. There's capital arrays, there's LLCs, there's having a contract with third-party administrators. There's all these different components becoming truly self-insured on your own. But in a group scenario, you're sharing that risk with like-minded businesses,



 employing your resources together. And the CRMBC specifically kind of does all that, heavy lifting for you, and you could still have the same benefits as being completely self-insured on your own.



 Controlling your own destiny in workers comp is super important. There's so many variables here in California, right? I mean, we're so much a pro-employee state that the employer is really at a disadvantage in the consumer's comp. But in the CRMBC, holding these resources, banding together with like-minded operators and owners, you can truly take control of workers comp. And then ultimately, if things pan out, like which they have been, meaning things are profitable, then you get a return on that investment. Whereas in traditional first-dollar insurance, you're paying a premium. Sometimes that premium is, I believe, unfairly assessed because of experienced modifications. And I don't put a lot of stock in the way experienced modifications are calculated, especially here in California, based on the factors I've already indicated. But you can then benefit financially. So rather than going to a insurance company, paying premium, having a great year, and then keeping all your money. You know what I mean? - Right. - So I'm a big believer. I really believe in the program. But again, you have to be at the right mindset as a business owner. You have to understand the pros and the cons.



 But really the pros and understand that you're part of a bigger machine and working collectively and together, it could benefit a lot of people. - That's a really good overview. Let's go back to basics. For someone that's listening to the podcast that doesn't understand the difference between first-dollar insurance or traditional insurance and self-insurance, how would you describe to a new client, in your own words, what the difference is and why you would choose one or the other and what factors go into making that decision? - That's a good point. I tend to speak insurance.



 Sorry about that. - That's why I have you on, so that's perfect. But it would be great for people that this is new to them to hear what you would say if they came into your office and you wanted to present this to them. - Right, so I would say first-dollar insurance is the transfer of risk for premium. It's a contract. So in first-dollar coverage, traditional workers' comp insurance, you would go to the insurance provider, who would get multiple quotes, hopefully, you would pick the most competitive or the one that best fits your need and it gets service and other factors. And they would rate your policy based on your payroll, your employee rate, and experience modification if applicable, and they would come up with a premium. In exchange for you, and the insurer paying that premium, you're transferring the risk of any one claim from dollar one, our first dollar of a claim, forever, from cradle to grave. And there's a premium for that, of course.



 In self-insurance, group self-insurance, you're pooling resources together with others and you are becoming self-insured. So maybe that dollar one up until a threshold point, an attachment point, I don't know what it is in the CRMDC, but the group is responsible for paying those claims. Anything above a certain threshold goes through reinsurance, then reinsurance, and maybe reinsurance after that. So there is a little bit of, there's more responsibility as a group because we are responsible for those claims up into a certain point. And because of that, though, in exchange for taking on that responsibility, and if we do a good job and keep our losses down, then the profits in the self-insured would go back to the policy holders or get reinvested into the program to better the program. Whereas in first dollar, the profits are held within the insurance company. - And they become, yeah, they become, they distributed to their shareholders or build their new building or do their Super Bowl halftime commercial. That's what we always talk about.



 Yep, yep. So there's a lot of different insurance products out there, whether it's captives, high deductible plans, self-insurance, traditional insurance. What would you say to, again, someone new coming, a new client coming in, how would you kind of do a compare and contrast of all of the different opportunities?



 - Well, when we say self-insurance, there's a lot in there, right? There's different forms. You named a couple of them. A high deductible plan is a form of self-insurance, right? And much like an auto insurance, I would explain that you're responsible for dollar one after meeting that deductible.



 But, and there's other types, right? There's only self-insurance. There's what used to be known as a Cal-retro plan here in California, a kind of a retrospective plan where you kind of hedge your bed and you say, if I fall within this loss ratio, I might get some money back, but if I go beyond, I might have to pay more. There's all these different variables that are available to policy holders here in California.



 And they all have risks, right? But they all have rewards. And it really depends on the type of clientele. So if I'm speaking to a client who is willing on their game, they care about safety, they care about their employees, they're doing the right things, they understand the big picture, then I might talk to them about these different forms of self-insurance. If they're a restaurant, I'm gonna ultimately say, this is the program for you because you are doing all of the right things and you would be joining forces with a whole bunch of other operators who are also doing the right things. So collectively as a group, sharing some of that responsibility, right? And collectively coming together, I feel like it's a win-win situation. - So speaking of which, when we look at the right member for a self-insured group, you've touched on it a couple of different times, we want operators that care about their losses that have tight controls. And there's some members that just look at their, not members of us, because we wouldn't take those type of members into our group, but there's some business owners that are not in control of their workers comp. And as a workers comp expert, talk a little bit about, unfortunately, often people don't pay attention to their workers comp until it's an issue. It's just something, they're focused on the biggest parts of their business, like their menu and their food costs and their labor and things like that. And workers comp doesn't get on their radar until there's an issue. So if you're talking to a restaurant owner and you're trying to get them to pay attention to their workers comp, what is it that you are highlighting to them? - Culture, organizational culture. If you come to me because your experience modification is very high or you can't seem to get control of your claims and you're looking to me for help, I'm gonna start with culture. And I'm gonna ask the hard question, right? What are you doing? What are you doing to make your environment better? What are you doing to keep up morale? What are you doing to hold onto quality employees?



 And then ultimately they get back to me and they say, "Will, but I just care about price, give me the cheapest price." That indicates to me that they probably belong with traditional insurance. I think they're gonna always have this problem. This problem is never gonna go away.



 The best fit for a program like the CRMVC, as you indicated, are operators who truly care. They understand the longing. It's not just about profits. It's not even just, it's not always about rate. It's about the long-term investment, keeping your cost not only low, but stable throughout a long period of time. So I've been doing this a long time, as I mentioned, and I've seen hard markets coming though. I've seen the market be very soft for a very long time. When I say soft, again, I'm speaking insurance. I mean, rates really low and competitive for a long period of time. But I've also seen rates for restaurants go as high as $12 per $100 of payroll. That's crazy compared to where rates are on average today, right? But we were there, and we were there because a lot of insurance companies were throwing themselves in front of a bus just to hold on the market share, meaning they were charging way too low premium to hold on the market share, knowing that much of their portfolio was made up of operators like I just described. They really didn't care, and just wanted the lowest price and their chasing rate. And ultimately had to go out of business or leave the state of California.



 So when we find those operators who truly care about the long-term, who care about their employees, and have a good culture, safety culture, or just a culture of communication, right?



 It could mean significant things over a long period of time. - What do you say to either restaurant owners or brokers who are afraid of self-insurance? Because as we all know, since the inception of some of these groups in the early 2000s, there's a lot of self-insured groups that have had some ups and downs. So what do you say to business owners today who are still worried about what happened back then?



 - It's a new day, new management. The numbers speak for themselves. I can give real life examples of my own clientele who over time have saved much more money



 compared to if they would have gone to the open market. If they would have jumped shift during those times of assessments,



 they may have saved money in a very short period of time, or at least that's maybe what they would have perceived. But I can give real life numbers about just how some of my clients have saved the program. If not all of them have saved a tremendous amount of premium over a long period of time based on the factors that I just talked about. That is creating stability, investing in culture, utilizing the resources made available to them, and creating a scenario where they're stable over a long period of time rather than doing this and chasing the rate over. Because there's no experience modification, that becomes a non-factor, right? Now it's just a matter of, hey, focusing on what I do best and that's running a great restaurant and focusing on my employees.



 - You've mentioned experience modification a couple of times. Let's explain to the listeners, what do we mean by ex-mod, experience modification, and then also the fact that we don't have ex-mod in self-insurance and so we're able to be much more flexible with underwriting. So why don't you give an overview of ex-mod? - Sure. And experience modification in California is a historical perspective of how an organization that qualifies for an ex-mod has done from a claims perspective. So in layman's terms, much like your auto insurance, if you have a lot of claims on your auto insurance, what happens when you get your renewal? It goes way up or you get non-renewed in many cases, right?



 Just like the name suggests, experience modification, it modifies premium based on that organization's experience. But the issue that I have with experience modifications is that it's not always a true indicator of how an organization is being run today.



 It's based on historical perspective. So four years back, not counting the most recent policy year is the data that's being used to calculate what an organization might pay today.



 Now you may have had a couple of bad years, four or five years ago, and now that's impacting your experience modifications, so you're paying more premium, but you've cleaned it up and you've had no claims, let's say, for the most recent two years. That's an unfair assessment to an organization which really turned things around and is invested in culture because just based on that alone, I could go into a whole bunch of different reasons why I don't put a lot of stock in experience modifications, but that's one.



 And because the CRMBC is a self-insured organization, they're governed by the Office of Self-Insured Plans, or OSIP, and not the workers comp insurance rating bureau. So that element from an underwriting perspective is completely removed. So to your point, you can now look honestly at an organization, how they're being run today, make sure that it's the right fit, and based on that, you can then price that organization.



 - And real life example is we just had one recently where there was a great operator that had one shock loss and on the traditional market, his rates had gone way up, and we were able to send people in, look at his operations and get to know him, and realize that that's just an anomaly, and we were able to give him a much more reasonable rate for the reason that you just described.



 Now we see all kinds of brokers in our program. Some brokers try to shop at every year, get a new quote every year, and move their people every year based on what's the lowest quote. Then we've got brokers like you who are actually educating their members on the business decision of joining a self-insured group. What advice would you give to brokers who don't quite understand this yet, but want to get into self-insurance?



 - Yeah, and just to be clear, I don't only write self-insurance, right? But to your point, I try to find the best possible fit for my clients, regardless of the industry. In this example, we're talking about restaurants.



 And unfortunately, you described the broker who shops and looks for the cheapest price. Unfortunately, oftentimes their portfolio matches with them. Now they operate, right? So I just feel like, just like anything else, if you plan on being in business, if you're a broker and you plan on making this your career and you want to do this for a long period of time, there's really only one way to do that. And that's by doing things right, right? Because our reputation is everything.



 Just like within the CRMVC, right? If the reputation is good, then word kind of travels and you bring on more clients, but you bring on the clients that best fit the program. And I would tell brokers to answer your question, to educate yourself, if this is your chosen career, invest in yourself and understand the differences and just know that there isn't only one option for your client. If your client is best fit in a program like the CRMVC, then you should learn about it, you should explore it and you should present it. Because someone else will eventually



 and you're gonna lose that client.



 - Give me your top three things that you would explain to a new client of yours that you thought, that you had already done an assessment and you thought that self-insurance is the way to go for them. What would be the top three reasons that you would give them? - You'll be rewarded for the culture that you've instilled and you've created within your organization, number one.



 You'll be recognized for it. You'll be around others that are a lot like you, who understand the long game and are also making investments in their organization's culture.



 And there's a chance that you could receive profits as a result, where you wouldn't receive that in traditional issuance.



 - So, Reuben, I have one last question for you. So if you had a crystal ball and you were to look at what's happening in the world today and what's happening in California, what do you think we're going to see in the next year, three years, five years in Workers Comp? - I think there are insurance companies out there today writing a lot of business and I won't name names, but going back to my comments earlier about throwing themselves in front of a bus to hold on to market share, that's happening right now. And even though the numbers suggest that the market should not be as soft, meaning prices should not be as low, they're continuing down that path, right? And I think that, and we've been talking about this for many years, but I think that the market will start to harden in about three or four years from now. And just the cost of medical, everything, right? I mean, look at people. I mean, we're talking about restaurants, right? Look what's happening to some of our fast food clients coming up here soon. I mean, it's incredible the amount of money that's going to have to be spent on just pay, well, just to keep your clientele, and not to mention remaining competitive, right? So I think there's a lot going on. I think the market's going to harden and I think it's in the best interest of not only restaurant owners, but all business owners to look at all options to create stability over the long period, over the longterm.



 - Thank you, Ruben, so much for giving us your time today. You shared so many important insights. I can't thank you enough. - Thank you, I appreciate it. - We'll see you next time.



 Thank you for joining us on the Self Insurance Podcast brought to you by CRMBC. If there's a topic you'd like to learn more about, or if you have any questions, please email us at info at CRMBC.com. Make sure to subscribe, comment, like, and share, and please join us again in two weeks for more Self Insurance insights. (upbeat music)

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