Case study: Worker’s compensation self-insurance feasibility

Date12th October 2022

The challenge

A large employer was insured through the state-based workers compensation scheme in their jurisdiction. Each year the employer paid a sizable premium to their state-based insurer in exchange for coverage for workers compensation claims. The employer’s workers compensation premiums had increased year on year due to poor scheme wide performance and industry performance. The employer wanted to explore whether self-insurance (setting money aside to pay for workers compensation claims) would result in a financial saving.

The solution

We compared the cost of self-insurance to the estimated cost of the employer’s market premiums to determine the lowest cost option. These cost comparisons were both retrospective and prospective, allowing for possible future premium changes due to market and environmental changes.

Given our extensive knowledge working with self-insurers across all jurisdictions, we also provided commentary on the non-financial benefits of self-insurance considering the employer’s size, complexity and jurisdiction of operation.

The business impact

Self-insurance was found to generate significantly savings for the employer. As a result, the employer elected to move to self-insurance.

Finity is now the self-insurance actuary to this employer providing ongoing regulatory actuarial advice. Having the same actuary conduct the initial feasibility and support the employer in applying for a self-insurance licence meant there was a smooth transition to self-insurance.

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