Workers' Compensation Plan Comparison And Analysis Recap
Guaranteed Cost
Premium Size: All accounts under $100,000
Advantages:
- Fixed cost
- No premium impact in current year
- All inclusive
- No Risk Involved
Disadvantages
- Higher policy year costs
- No savings on good years
- Subject to market whims
Retrospective Rated
Premium Size: Minimum $100,000
Advantages:
Disadvantages
- Cost can increase
- Recalculations may negate returns
- Multi-year process
Deductible Plans
Advantages:
- Reduced up front costs
- Greater potential for savings
- Greater cash flow
- More control over claims and Loss Control
Disadvantages
- Increased risk of higher costs
- Collateralization required
- Long term process
- Large premium and assets req.
Captive Programs
Premium Size: $250,000 plus
Advantages:
- Stability of coverage and pricing
- More control over claims and service
- Return of unused loss fund and invest. income
- Lower fixed costs
- Can participate at lower premium levels
- Multi-state capability is easier
Disadvantages
- Possible significant penalties
- Long-term capital investment
- Pyramiding of letters of credit
- Responsibility for other's losses
Self Insurance
Premium Size $1,000,000
Advantages:
- Lowest fixed costs
- Maximum use of cash
- Maximum control over claims
- Experience tends to improve
Disadvantages
- Government regulations, controls and monitoring
- Highest degree of risk
- Requires substantial commitment in resources and manpower
- Difficult in multi-state situations
- Ties up credit and capital to the greatest extent