Don't forget to share this post!

SIR Program – One Step Closer to Self-Insuring

In today’s competitive landscape, smart businesses are constantly seeking ways to reduce costs, gain control over risk, and improve operational efficiency. One strategic solution gaining traction is the Self-Insured Retention (SIR) Program. An SIR program allows businesses to manage and fund the first portion of their own claims before traditional insurance kicks in—providing a crucial stepping stone toward full self-insurance.

What is a Self-Insured Retention (SIR) Program?

A Self-Insured Retention (SIR) Program allows your business to self-fund a portion of claims before your insurance coverage activates. Unlike a deductible—which is often handled by the insurer—the SIR is your direct responsibility, meaning you manage the first layer of risk, including claims handling, litigation (if applicable), and payment up to your set limit.
This approach not only reduces insurance premiums but gives your organization more control over how claims are resolved, including speed, cost, and outcomes.

Top Benefits of SIR Programs

Let’s break down why more companies are adopting this model:

✅ Cost Savings Over Time

By absorbing manageable losses and reducing reliance on traditional carriers, SIR programs can dramatically lower premiums—especially for companies with a favorable claims history.

✅ Claims Management Control

You’re in charge of how claims are handled, which can lead to faster resolutions, better outcomes, and reduced litigation or friction with third-party adjusters.

✅ Improved Cash Flow

Instead of paying large, fixed premiums, you retain capital longer and pay only when a claim actually occurs.

✅ Customization

SIR programs can be tailored to match your specific industry, risk tolerance, and loss experience. You choose your retention limit, claims administration process, and risk control strategies.

Real-World Example: How a SIR Works

Scenario:
Your business selects a $250,000 SIR. A worker injury results in a $600,000 claim.

  • Your responsibility: You handle and pay for the first $250,000.
  • Insurer’s responsibility: They take over the remaining $350,000.
This structure makes sense for businesses that have the resources and systems in place to manage smaller claims internally while still protecting against catastrophic events.

Who Uses SIR Programs?

SIR programs are ideal for companies in industries with predictable, frequent, or moderate-severity claims, such as:
  • 🚛 Trucking & Transportation – Frequent physical damage or liability claims, often low-to-moderate in value.
  • 🏗️ Construction – Injuries or property damage claims are common, but many are manageable without insurer involvement.
  • 🏥 Healthcare & Medical Groups – Especially for malpractice or employment-related risks.
  • 🏭 Manufacturing & Distribution – Higher exposure, but a good claims history can make self-funding low-cost claims feasible.

Steps to Implementing a SIR Program

  1. Conduct a Risk Assessment
    Analyze your loss history and claim types to determine if a SIR is financially viable.
  2. Determine an Appropriate Retention Limit
    This depends on your budget, claims experience, and tolerance for financial risk.
  3. Set Up a Claims Handling Framework
    Decide whether you’ll manage claims internally or use a third-party administrator (TPA). Efficient claims handling is key to controlling costs.
  4. Establish Reserve Funds
    Allocate funds to pay claims within the retention. Financial planning is critical.
  5. Choose the Right Insurance Partner
    Work with a carrier who supports SIR structures and offers flexible excess liability or umbrella coverage.
  6. Monitor & Adjust
    Continually monitor your claims, risk trends, and financial impact. Adjust your retention or program structure annually as needed.

Common Misconceptions About SIR Programs

 “It’s only for large corporations.”
Not true. Mid-sized businesses with strong financials and stable losses can benefit from SIRs—especially in industries like trucking and construction.
 “It’s too risky.”
When structured correctly, SIR programs are strategic, not risky. The key is setting an appropriate limit and having strong claims management.
 “It replaces insurance.”
False. SIR works with your existing insurance—it just means you take on the first layer of risk before insurance kicks in.

Is a SIR Program Right for You?

Ask yourself:

  • Do we have a predictable claims history?
  • Are we frustrated with rising premiums?
  • Do we want more control over how claims are handled?
  • Can we financially absorb a defined level of risk?
If the answer is yes, a SIR program might be the perfect next step in building a resilient and cost-effective risk management plan.
Take the Next Step with Nelson Insurance
At Nelson Insurance Agency, we help businesses design and implement custom SIR programs with trusted carriers and TPAs. We’ll walk you through:
  • Retention limit recommendations
  • Claims handling options
  • Excess policy placement
  • Compliance and reporting tools

Next Step

We are here to serve truckers through commercial trucking insurance, risk management, and industry support. Want to learn more or work with us? Request a quote or call.

Related Articles