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Self Insured Pools – Are They Really Worth It?


Self Insured Pools Are Really Worth It ?

Self Insured pools for Workers Compensation can be a great risk management technique. An employer that is not large enough to be self insured may find that pooling their premiums and risk with homogenous entities to be a great budget saving technique.

Vector Graphic of Hands With Plant Self Insured Pools Concept

Self insurance pools have seemed to lose popularity over the last few years. I think some of it is due to bad press. Some of the reasons for the bad press was justifiable. There are a few areas to consider when joining self insurance pools.

  • Are the groups homogenous or at least somewhat similar. Predicting risk for a pool where the insureds are not related can be difficult. If you are a restaurant , would you want to be in the same pool with an oil transporter?
  • When do assessments from the pool occur?
  • If your company leaves the pool or if the pool fails, for how long can your company receive assessments into the future? We have clients that are still being assessed five years later.
  • Is the law of large numbers in place? How large is the pool? If you only have a few members and one of the companies has a very bad year, your company may have to pay very large assessments while having a great safety program.
  • How are the Mods or LDF’s calculated? How does the pool differentiate the risk among members?
  • Who is going to handle the claims? Some TPA’s are better than others.
  • Why did the prior members leave the pool?
  • Are all the legal requirements met for each state? What happens if your company expands into another state or states?
  • As a member, what are your company’s voting powers? What voting powers does the administrator have in meetings? The administrator may have more votes than each individual member
  • Picture Finger Pointing Self Insured Pools Digital Text

    What happens if the pool fails or is deemed insolvent by the state?

  • What happens to the claims if the pool fails? Does the pool pay into some type of state insolvency fund? This is very important as a way to avoid being stuck to handle your claims after already paying into the pool.
  • What percentage of the total operations budget is held back to pay claims? Most states consider any type of insurer or pool insolvent at less than 15%.
  • Who is the reinsurer? Can you obtain a copy of the reinsurance contract?

There are many other considerations. I wanted to list a few of them. The questions come from files that have been shipped to us to handle after a pool fails and there was no backup. I basically reversed engineered the questions.

Picture Hand Holding Credit Card Self Insured Pools Close Up

Bottom Line – pools are great for self insurance if properly investigated and all angles have been examined before joining the pool.

I may be a little jaded to them as we have had to handle many claims where:

  • The pool failed.
  • There was no state backup to handle the claims.
  • The reinsurance contract gave the reinsurer an out.
  • The claims had not been adjusted for over 90 days.

Also Read: Assigned Risk Pool With a .85 E-Mod – How Can This Happen?

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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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