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Law Of Large Numbers vs Tennessee Restaurant Association


Law of Large Numbers vs Association Work Comp Funds

The Law of Large Numbers ceased another association work comp fund.  Please see my last post on the article about The Tennessee Restaurant Workers Compensation Fund Failure.

Graphic of Piggy Bank Law of Large Numbers Coins

In my opinion, while there are accusations of mishandling of funds by the head of the Tennessee Restaurant Association, that is not the reason for the failure of their Workers Comp fund. He likely did not even mismanage the funds. What happened is the usual result of having a self-insurance pool for homogeneous employers.

As I have posted in the past, the Law of Large Numbers is the same as the old saying – “there is safety in numbers.” You cannot expect statistically over a long period for a group of safe employers (restaurants) to keep subsidizing unsafe restaurants by paying more than their fair share. For homogeneous employers, a group larger than just the restaurants is required to spread the risk.

Hand Presenting Funds Law Of Large Numbers Illustrating

As being in the Tennessee Restaurant Association Workers Comp Fund is voluntary, the restaurants that tend to be bad risks will stay in the pool. The restaurants that have better risks would look for Workers Comp insurance coverage elsewhere as insurance carriers would write them more easily than the bad risks.

I have seen association-based Workers Comp Funds for trucking, construction, manufacturers, and others fail due to the inability to spread the risk amongst enough members. There have been a few that never even got off the ground.

What do you do as an employer? Explore all the options by getting quotes from different insurance carriers and agents. There is nothing wrong with shopping your account out to the Workers Comp insurance market.

Violating the Law of Large Numbers should be avoided at all costs.

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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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