Group Self Insurance

Workers’ Compensation carriers generate revenue from two sources:
1. Premiums calculated from state mandated rates
2. Investment income

The Workers’ Compensation income/expense equation works like this:

• Premiums: are collected on the basis of rates which are calculated on the results of the combined loss experience of "good" and "bad" accounts. The safer businesses are paying for the claims experience by the unsafe businesses. Self insurance allows you to set your own rates based on your own claims experience, and eliminate the negative effect of accounts with multiple claims.

• Investment Income: is not accounted for in the base rates, so it is, in effect, a bonus to insurance companies. Self insurance provides for the return of the investment income to the insured who generated the income. Investment income can amount to a significant sum of money, as income is earned on prepaid premiums, a company’s surplus, and reserve claims which may not be actually paid for several years.

• Claims Payments: can be reduced by only allowing safety conscious businesses to participate as well as by aggressive claim investigation and litigation.

• Expenses: can be greatly reduced by a self insured group as compared to the expenses paid by insurance carriers. Reduced overhead, efficient claims management, and group homogeneity (specialization) all contribute to the ability of the group to function with minimum expenses.

• Profit: will be earned for the financial benefit of the Trust’s members, to be distributed as policyholder dividends or held by the Trust as allocated surplus.