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Modified Self Insurance – Caveat On Risk


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.

Man Standing Modified Self Insurance On Pile Of Coins Digital Composite

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
Picture of Human hand Putting Stethoscope on Piggy Bank Modified Self Insurance Concept
(c) 123rf.com

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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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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