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Workers Comp Self Insurance Conversion – Five Questions To Ask

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Workers Comp Self Insurance Qualifiers

Most of the Workers Comp self insurance qualifiers center around the employer’s ability to have enough money to pay claims.

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One of our most requested services is to see if self insurance is a valid option for a large company. If your company is considering the switch to self insurance, there are five questions to consider before switching to paying out-of-pocket for Workers Comp claims.

1. Will your company qualify with your respective state Workers Compensation Board or Industrial Commission? With so many companies filing for bankruptcy, the state agencies are much more picky than in the past. There are minimums that must be satisfied before even applying. For instance, many states have a minimum liquid assets requirement of $500,000.
2. Will your company have enough of a budget cushion in case your first self insured year is much more costly than forecasted? We have rarely seen this happen, but it is a risk that may possibly need to be funded.

3. Is your company prepared to do a RFP (Request For Proposal) to find a TPA (Third Party Administrator) to process your Workers Comp claims? It may not be a wise choice to have your current insurance carrier handle the claims through their TPA unit.

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4. Is your company or governmental unit prepared to assign the task of tracking the funds spent by the TPA? Unlike normal Workers Comp insurance, the task of monitoring the TPA will be a laborious task.
5. Is your E-Mod low at this point? Self insurance may possibly be more expensive if your governmental unit or company has a low E-Mod such as a .6 or .7. E-Mods this low may counteract all the overhead that is charged by insurance carriers. This area will require a large amount of financial analysis to compare low E-Mod regular Workers Comp insurance to self insurance.
I could add a few more to the list. I may add in another post later this week on this subject.
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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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