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Six Ways To Leverage Your Workers Comp Premiums For Savings

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Six Ways To Leverage What Premiums Are Paid Out

The  six ways to leverage your Workers Comp premiums are listed below.  Workers Compensation is almost always considered an expense.  What if an employer decided to analyze WC as an investment?

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The definition of leverage in this case is borrowing or using other funds to increase the rate of return on an investment.   How does one leverage Workers Comp premiums?  The following ideas on leverage are based on Workers Comp as an investment.  They will not work when viewed as an expense.

1. Self-Insurance – by not paying the insurance company’s fees and overhead, the employer can retain this capital to invest elsewhere.  This is a great way to reduce capital outlays if an employer does not experience a spate of bad accidents.  The risk and reward are both high.

2.  PEO’s (Professional Employment Organization)  An employer can leverage their premium outlays by the pay-go concept.  Workers Comp is only paid as payroll is incurred.  There are no huge outlays upfront.  PEO’s are one of my favorite risk-shifting techniques.

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3. Large deductibles –  basically modified self insurance.   The main difference from self insurance is the carrier will still report Mods to the rating bureaus.  The claims handling fees can be much more expensive than with pure self insurance.

4.  Examine past policies and audits – recovering already expended funds can be looked at as “found money.”   Employers are able to reinvest these funds into the company.  One of the lower risk high returns of Workers Comp.

5.  Safety Enhancement – while some employers consider adding in or enhancing a safety program as too expensive, we have seen a 4 to 1 return on investment when a new or improved safety program has been initiated.  Keeping employees safe and out of the claims system reaps rewards for all involved.

6.  Captives  –  the “cutting edge” method of leveraging premiums.  Offshore captives allow for certain tax benefits.  Employers are able to use funds that would have been invested in premiums in other parts of their business.  There are many options for employers using captive arrangements.

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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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