The Modified Self Insurance
Captives, large deductibles, and other types of workers comp modified self insurance are now gaining great importance due to the present economy. All companies are now searching for a way to insure for Workers Comp accidents at a reduced rate. One of J&L’s specialties is providing alternatives to traditional insurance programs.
Basic self Insurance, captives, large deductibles, self insurance pools, and other types of self insurance have their pros and cons. Regardless of the type of self insurance, your company is directly “on the hook” for the losses.
Reinsurance may be a great stop-loss measure for a single large claim or a string of unanticipated accidents when compared to a loss history. Until the aggregate (large number of claims) is reached or a single accident payout reaches a certain level, your company is on its own when having to pay Workers Comp benefits.
There is a large amount of interest in captives from almost all of our medium to large sized employer clients. I wanted to cover an important point about captives. Captives are the “cutting edge” of self insurance presently.
There are many new terms with captives such as:
- Fronting company
- Protected cell
- Parent company
- Domicile
I wanted to clear up any confusion about who funds the captives. Captives (as with self insurance) are funded somewhat indirectly out-of-pocket by the employer. If your company’s risk tolerance is not to the level of being self insured, a captive may not be for you. There are also upfront costs that can be substantial when establishing a captive or even a rent-a-captive.
I do not want to discourage any company from seeking any type of insurance program that may save funds that can be used elsewhere in a budget. However, it is a giant task to commence a self insured or modified self insured program and then decide that is not the desired type of program.
I will cover some of the other modified self insurance programs next time.
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