Reasons to Consider a Self-Insured Workers’ Compensation Program
In addition to reduced administrative and claims handling costs, premiums that would otherwise have been paid to an insurance company for fully-insured cover are retained by the self-insured.
There will be up-front costs for stop-loss insurance but these are typically in the region of 12.50% of the fully-insured premium with another 12.50% for administration. These amounts will vary according to the size of the company, the self-insured retention, and numbers of claims.
Using the above example, 75% of the equivalent fully-insured premium is then retained by the company which need only be spent when claims happen. Any money not spent from this amount is retained by the company leading to an improved bottom line.
Better Management of Claims and Reduced Claims Costs
An employer may feel that its workers’ compensation claims are not being managed as well as they should be. However once a company has become responsible for managing its claims, it will have a vested interest in ensuring that claims are dealt with quickly and efficiently.
The role of paying claims is normally outsourced to a professional claims payer such as a Third Party Administrator but as the claims payer is appointed by the company, the party responsible for paying claims will have an incentive to provide the levels of service required by the self-insured company or risk being replaced.
Reactivity to Claims to Reduce Future Costs
Having a direct financial interest in reducing claims provides an increased incentive for the self-insured company to evaluate claims, or patterns of claims, as they occur. New health and safety measures that are necessary can then be implemented to reduce future similar claims.
Reduced Administrative Costs
The administrative and claims-paying costs which are built into a traditional fully-insured workers’ compensation policy can be reduced by appointing a claims payer whose processes and expertise is streamlined for maximum efficiency.
In addition, any commission that might be payable to an intermediary for the purchase of a fully-insured workers’ compensation policy is avoided as well as State taxes on the full insurance premium.
Improved Employee Relations
Should enhanced employee training and new workplace health and safety measures need to be implemented, employees will be aware that their employer has a genuine concern for their safety and as a result of being self-insured be better placed to take care of them in the event of an accident.
Also in this section
A History of Workers' Compensation
Initial Considerations For Self-Insuring Workers' Compensation
The Information You Will Need to Self-Insure Workers Compensation
Self- Insuring Workers Compensation - The Four Step Process
How Workers Compensation Excess Insurance works
Selecting an Excess Insurer for Workers Compensation