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Traditional Workers Comp Insurance Policies – There Are Other Choices

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Alternatives To Traditional Workers Comp Insurance Policies

Many alternatives to the traditional Workers Comp programs are available in today’s insurance marketplace. The trend is when the traditional WC insurance marketplace becomes expensive and employers search much more intensely for alternatives to the regular WC insurance programs. Most carriers do have non-traditional WC insurance programs in place, and more alternative programs are being added daily.

Picture Of Doctor And Senior Man Traditional Workers Comp Holding Gold Card
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Small deductible – An insurance plan that allows the employer to pay their own WC claims up to a certain amount, usually $500.Some states require the employer to file the claim with their insurance carrier even though the claim stays below the deductible. One very important pitfall is the claim may develop into a serious claim before it reaches the deductible, and the WC adjuster would have no knowledge of the claim.The small deductible concept goes against #1 of our Four Secrets to Saving WC $.If an employer holds the First Report of Injury, serious claims problems could develop before the claims adjuster can properly handle the initial part of the claim.

Self-Insurance Pools – These enable common employers or associations to pool their money together as a group to pay WC losses. A Third Party Administrator (TPA) handles the claims. Almost all states allow self-insurance pools if the pool can meet certain minimum requirements such as the funding and viability of the pool.

Graphic Of Grey Shield Traditional Workers Comp With Health Medical Icon
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Assigned Risk Plan/Risk Pool (ARP) – please refer to the definition in the WC Insurance Definitions section. The ARP is not a voluntary choice. The rates in the ARP are much higher than the general voluntary marketplace. The ARP is the fail-safe insurer if a company cannot find any insurance with any carrier due to high E-Mods, type of business, unsafe workplace, dangerous occupations, etc. The insurers are required to write a certain percentage of their business from the ARP. The use of the techniques in this manual will enable your company to get out of the ARP unless the voluntary insurance marketplace is not writing WC insurance for your type of business.

Loss Sensitive Plans – There are numerous plans of this type in the WC insurance marketplace. Their main characteristic is that an employer is willing to chance that their company will have no or little WC claims for a given period of time. However, if an employer has just one bad claim, or more than a very few claims in a specified time period, their insurance WC rates will increase exponentially. Loss Sensitive Plans look good on paper, but they can possibly end up costing an employer more $ than if they were in the above-mentioned ARP.

Captives – Check out this post on captives.
Picture Senior Couple Traditional Workers Comp Insurance Policies
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Self-Insurance – If your company is large enough, most states will allow you to self-insure for WC losses. Self-Insuring is a cost-effective method to remove your company from the expensive WC insurance system. Your company will pay all claims from your internal budget. All insureds that we have assisted in becoming self-insured have saved WC $ over a three year time period. The following is an example of the minimum requirements by a Department of Insurance (DOI):

  • The employer must have $500,000 in fixed assets.
  • A performance bond must be purchased and renewed every year.
  • The employer must file with the DOI 90 days before they wish to self-insure.
  • The employer must have reinsurance at an acceptable level.

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One Response

  1. Most of the financial service firms and consultants represents their traditional workers comp insurance policies, which are really works for us, as per this blog as well. Most consultants do have non-traditional WC insurance programs in place, and more alternative programs are being added daily.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt 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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