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Oklahoma Manufacturers Association’s Big Mistake


Oklahoma Manufacturers Association

Map of Oklahoma Manufacturers and location icon

A few days ago I posted about the Oklahoma Manufacturers Association wanting to establish a self-insurance pool for Workers Compensation. They have done well with a health insurance pool and wanted to try to do the same with Workers Comp.

Workers Comp requires a large pool of employers to insure themselves. The Law of Large Numbers requires a huge pool of insureds. I also question that the pool should be homogeneous employers. The Law of Large Numbers is the same as the old saying about “Safety in Numbers.”

So many self-insurance pools have gone under that I will not list them as it would take up tens of pages. Why did these self-insurance pools not survive? The Law of Large Numbers requires the risk to be spread over a very large group.

If the Oklahoma Manufacturers Association starts a self-insurance or risk pool, they will be segmenting the manufacturers from all other employers in the state of Oklahoma. If all manufacturers are having problems with say, back strains and carpal tunnel, what in the group would offset these injuries?

Meeting Of Factory People Oklahoma Manufacturers Picture
Wikipedia – Alex Rio Brazil

One of the other problems is that ALL manufacturers would have to join the risk pool. Usually, when a risk pool is founded, a small percentage of the possible members will join. There may be more members joining later, but usually, the pool has already suffered too many losses to spread the risk, and the members see their Workers Comp premiums double the next year.

Pools will usually take in all applicants, regardless of their past claims histories and E-Mods. This initiates the process of Adverse Selection. Adverse Selection occurs when the riskiest companies sign on to a risk pool without the balance of the safer companies also coming into the risk pool.

I do hope the Oklahoma Manufacturers Association has a very successful risk pool for Workers Compensation. The odds are stacked very heavily against them.

Up Next – More on Oklahoma

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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