To save money, many small-business owners go to “self-insured” groups rather than getting insurance from a regulated and state-approved company or from the state insurance fund. But a recent survey by Opinion Research Corp. showed that many small-business owners and managers didn’t know that several self-insured trusts across the nation failed during the past two years — and that’s a problem.

According to the survey, 58% of the 531 respondents were unaware that companies belonging to self-insured groups remain financially responsible for the claims of all companies in their group, not just their own business. Only 34% realized they could be legally and financially responsible for the entire costs of workers’ compensation claims owed by their self-insured group.

Lance Wallach, author and the National Society of Accountants’ Speaker of the Year, suggests that a better solution than these groups for reducing workers’ comp costs by 50%, for example, is to rent a cell or share a captive insurance company.

Basically, a captive is created by the insured (which can be a group of small businesses) and is a legitimate insurance entity regulated by the U.S. government. The captive can “rent” an available space to other businesses to benefit from. The insured contribute to the risk capital.

“These companies are taxed less heavily than regular insurance companies, and that’s where the savings comes,” Wallach says. Although they are beneficial, they must be set up carefully. For more information, go to,, or To read more about captive insurance, click here.