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Converting from Self-Insurance To The Voluntary Market Due To Pandemic

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Converting From Self-Insurance To The Voluntary Market – 10 Item Checklist

The subject of converting from self-insurance to voluntary market policies has been brought up quite a few times due to the loss of employees by some larger companies.  Some Workers Comp self-insureds shrank during the pandemic due to overall bad economic conditions.

Recently, the Gross Domestic Product showed a drop of 1.4% – 1st Quarter 2022.

I received a few questions from earlier in the year from companies that were considering converting from self-insurance into other programs such as large-deductible or voluntary market policies.  These are some of the steps that I recommended to the companies.

Picture of converting from self-insurance 10 steps
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Converting From Self-Insurance Considerations/Steps Checklist

  1. Do nothing.  What are the reasons for the conversion?  Do they justify paying what would likely be higher costs with a voluntary market policy?
  2. Obtain multiple Loss Development Factors (LDFs) if that is the number that is the basis for the switch.
  3. What E-Mod would your company now have if you were not converting from self-insurance? Yes, the synthetic E-Mod number can be calculated for you.
  4. Is your company going to grow back to the size it was pre-pandemic?  If so, switching in and out of a voluntary program may not save that much in costs.
  5. Have you looked at large-deductible programs or PEOs?
  6. Have you looked at bringing your reinsurance level lower?  If you are concerned about a catastrophe or a series of severe injuries, you may be able to lower your reinsurance level to a lower amount.   The flip side is that your company will have to pay more premiums to have a lower reinsurance level.
  7. Have you evaluated your Third Partt Administrator? (TPA).  Not every TPA operates the same.  A better deal may exist for claims handling.  Evaluating your TPA every three years is a good idea.  Three years is the timeframe most governmental units use for the evaluation of their program and to seek bids from competing TPAs.
  8. Your self-insured claims will not disappear when you switch.  The claims will require handling until closure.   Your company will have to deal with two separate insurance programs.
  9. A loss run review and an LDF projection will always help you establish “where you are” in your insurance program.
  10. Seek out advice from true experts when considering converting from self-insurance.   There are many experts in voluntary market policies, not so many in self-insurance.

 

Converting from self-insurance can be expensive.  The above checklist is only part of the picture.  Seek out consultants to help your company.

 ©J&L Risk Management Inc Copyright Notice

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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 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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