Large-Deductible Workers Comp & Other Programs Popular As Rates Rise
As Workers Compensation rates continue to rise across the country, increasingly more retail insurance agents and their larger clients are looking to alternative solutions to address the challenges that companies face. Organizations are looking for ways to reduce costs and save money and Workers Compensation is one way to do so.
With a well-designed and managed loss-sensitive product, companies can potentially realize lower costs by assuming a greater proportion of their risk. You get increased cash flow, lower costs, and improve claims outcomes for the business and its employees. What’s important with a loss-sensitive program is that the organization is committed to fully leveraging the insurer’s loss control, claims, medical, and pharmacy management programs.
Additionally, what is critical is choosing the right risk-financing structure. That involves having the business itself, you, the agent, and the carrier carefully examining the organization’s current financial situation and short- and long-term goals when considering a program structure. Some of these structures include:
Incurred Loss Retro: Designed to provide premium deferral that increases the financial flexibility of an insurance program by postponing current payment obligations to the future. The cost of the insurance program is determined by the actual incurred loss experience for a specific policy period. The premium is adjusted annually until all claims are paid and closed.
Paid Loss Retro: Premiums are determined using paid loss amounts rather than incurred (reserved amounts). Timing of premium and loss payments are negotiated prior to inception and disbursements are made as costs are realized and billed.
Large Deductible Plans: An insured is responsible for reimbursing the insurer for claims up to a certain dollar amount and the insurer is responsible for paying claims in excess of the deductible amount. The insured funds an account (loss fund) to pay losses and the insured reimburses the fund as losses are paid. The insured must collateralize, usually by letter of credit, an amount approximately equal to the difference between paid and ultimate losses.
There are advantages and considerations for each of these structures that we at Caitlin-Morgan can go over with you. For example, loss-sensitive programs are not advised for accounts with loss experience that is inconsistent or unpredictable. Just give us call at 877.226.1027 for more information about our workers comp programs.