Self Insureds And The Workers Comp System - Misconceptions Part II

I will cover the first bullet from my last post.

We often hear at conferences and from clients that a self insured employer is out of the Workers Comp system. Nothing could be further from the truth.

Being self insured actually only makes the method that you pay your Workers Comp premiums change for the most part. Instead of paying insurance company premiums, you are actually paying the premiums directly out of your budget as a direct cost item. Paying premiums actually takes the chance of a string of claims wrecking your insurance budget. Your company will actually have to monitor the TPA that you use more closely than an insurance company. As I just mentioned, your TPA is paying directly out of your budget.

Just because you are self insured does not mean you have eliminated your company from having an E-Mod or X-Mod.. Your company will now have the same thing, it is just called a Loss Development Factor, or LDF. We have calculated many of them for self insureds. LDF's can forecast your Workers Comp expenditures for up to 10 years. LDF's can affect your:

• Choice of TPA's
• Letters of credit
• Financial standing with your lender
• Ability to stay self insured
• Self insurance bond
• Reinsurance
• Required budget allocated to Workers Comp expenses

Do these look familiar? These are the same things that are affected by an E-Mod/X-Mod.

An outside party has to handle your claims the same as a regular insured. Your TPA will usually be the same insurance company that uses the same adjusters to handle premium-based insureds. Your claims have to be handled in the same method regardless of your insurance status.

There are many other similarities between a self insured and a first-dollar insured. I have just covered a few, as the post would be very long if I covered them all.