"It is estimated that over 6,000 corporations in the USA today elect to self-insure their Workers' Compensation plans. Self-insuring allows these companies to help control costs and to ensure that their injured workers are receiving cost-effective and appropriate care when injured."
When properly constructed, a self-insured plan for Workers’ Compensation can bring significant benefits to an employer. Costs are lower as the self-insurer retains the profits and expenses that are normally built into traditional insurance premiums. In addition, there can also be further reduced costs since claims costs themselves are often lower. This is due to the self-insured employer having a vested interest in preventing claims as well as controlling costs through more hands-on managed care services.
A more contented workforce with better employee relations can be created as a result of improved training and loss controls creating the impression that the employer is more caring towards its workers. In addition, investment income can be generated from funds set aside to pay claims.
The purchase of excess of stop-loss can control financial risk but an employer also needs to be aware of increased responsibilities which include administering and paying claims as well as funding the self-insured retention. Partnering with the right service providers is, therefore, essential to a successful self-insured plan.
Up until the Industrial revolution there was little need for any workers compensation statutes. It was only with the arrival of high-speed machinery and mass-production processes that work related injuries, deaths and diseases started to occur in meaningful numbers.
Self-Insuring Workers’ Compensation gives a company the ability to implement better loss control and claims management leading to reduced claims costs as well as improved employee relations. In addition, cash flow is enhanced as the premium that would otherwise be paid to an insurer can be retained and used to pay claims with any surplus being kept by the company.
In deciding whether to implement a self-insurance program there are a number of decision criteria that need to be considered. Whilst self-insurance provides many benefits there are some additional administrative responsibilities that need to be considered as well as financial risks, although the latter can be controlled by specific and aggregate protection.
This is a general list of the information that you will most likely need to provide to your State as well as to your Third Party Administrator, Excess and Bond Insurers.
Becoming a qualified self-insurer is by no means appropriate for every company. Prior to committing the resources to perform a feasibility study, an initial review should be conducted to ensure that there are no immediate barriers to becoming self-insured. Having made the decision to self-insure, compiling the required information in advance will assist in the smooth transition to a self-insured plan.
Due to the potential for large losses arising from disability or the death of an employee or multiple losses arising from a single event such as a fire or an explosion, excess insurance is an important component in the creation of a self-insured plan for WCA.
In view of the importance of the excess contract, financial security and levels of service are important issues to consider. It is also important to ensure is that the choice of Excess Insurer is the correct one.