Are Self-Insureds Really Out of the Workers Comp System

I often hear when talking about Workers Compensation that a company is self-insured and does not need to worry about the trials and tribulations of the Workers Comp system as it is today. Actually, even if you are self-insured, the Workers Comp system is still there, but the numbers have changed.

Loss Development Factors (LDF's) are a twist on the E-Mods that are promulgated for regular insureds. The span of time involved is much longer - 10 years vs. 3 years for an E-Mod. You have to budget for those payouts just as if you had regular insurance. J&L has calculated a number of LDF's over the years. There is software out there that will do LDF's, but there has to be some intuitive inputs to the programs. An LDF is not set in concrete.

The claims are handled by a Third Party Administrator (TPA). The files are handled the same whether an insured is self-insured or not. One of the areas that we sometimes have concerns over is that if there are self-insured and regular-insured files in an adjuster's claims load, the self-insured files sometimes seem to have less care. I am not saying that this happens all the time, but we have seen enough in our audits to call it a trend.

If you are self-insured up to a certain amount, say $250,000, the insurance carriers are still required to report your claims numbers to NCCI or the State Rating Board and your company will still receive an E-Mod.

You may look back in our archived posts on the post called the Self-Insured Phenomenon for another article on Self-Insureds.

Next Up - The National Council on Compensation Insurance (NCCI)(c) - who are they and what have they been up to lately?