Companies opt for higher self-insured retention levels to cut costs: PanelPosted On: Oct. 3, 2012 12:00 AM CST
INDIANAPOLIS — Many employers are selecting higher self-insured retention levels to help keep workers compensation costs down, but that option may only be available to companies with solid finances, a panel of excess workers comp insurers said.
A discussion on the state of the excess comp coverage was held Wednesday morning during the Self-Insurance Institute of America Inc.'s national conference in Indianapolis. Panelists included Melodee J. Saunders, president and chief operating officer of Midwest Employers Casualty Co. in Chesterfield, Mo.; Gene R. Maier, senior vice president of workers compensation underwriting for Safety National in St. Louis; and Charles C. Caldwell, president and CEO of Midlands Management Corp. in Oklahoma City.
Panelists noted that self-insured retentions have risen steadily during the past several years, and that firming in the current comp market seems to be pushing more employers toward higher retentions.
"Most of the buyers seem to opting for the higher (retentions) to lower their upfront costs, whether that's the right thing to do over time," Mr. Caldwell said.
Mr. Maier said state insurance regulators have pressured some companies to select lower retention levels in order to ensure that comp claims will be covered, particularly among firms that are facing financial challenges.
"In many situations, the state is analyzing the financials of the self-insured and really determining what the (retention) should be,” he said. “So companies that have great financials, they have the luxury of being able to opt for that higher (retention) and ... the state may be trying to keep them at the lowest (retention) possible.”
The decision to take a higher retention should be based on the strength of a company's workers comp program, Ms. Saunders said. That includes the effectiveness of the company's third-party administrator, a consideration of its risk appetite and its ability to predict comp losses.
"Whether or not you take a higher (retention) shouldn't just be purely a decision based on whether I can buy cheap excess insurance or not," Ms. Saunders said. "It should be what's my financial condition as a company ... and how much risk can I take into my balance sheet?"