Guaranteed cost program versus self-insured group
Posted: Tue Oct 20, 2009 3:32 pm
Guaranteed cost program versus self-insured group
There are two types of most commonly used insurance programs in the market: The guaranteed cost program and the self-insured group. The following are the benefits and pitfalls to both and below that is an illustration of how the BBSI model encompasses the best of both worlds.
Guaranteed Cost Program
• The guaranteed cost program or standard market insurance quote is the most commonly used insurance product for workers' comp. The benefits of the guaranteed cost program lye within the name. A guaranteed cost program means that you have a set amount of premium to pay regardless of current year losses. Example ($100K in premium with $150K in losses still equates to $100K in premium for the current year).
• Pitfall to this program is that based on the above example the client's future investment goes up as a result of an inflating ex-mod in the future.
• Pitfall to the program is the average deposit is 10% to 25% (though in many cases this deposit will be applied to the premium)
• Pitfall to the program is the only ROI is coverage. If you look at premium as investment capital as opposed to a line item expense then your only return on investment is coverage. If you have no claims then your investment is wasted annually and you have no tangible ROI.
Self-Insured Group
• The Self-Insured Group (a.k.a - group pooled risk, captive) is more common among larger employers or like industry groupings of companies. The benefit to this program is that you can leverage your cost by pooling your risk. In many cases you will also have the ability to get money back in some type of dividend program and should have some type of loss control assistance as well.
• Pitfalls to this program are that your deposit is normally much more substantial than the guaranteed cost market. The group also has the ability (and normally will exercise this right) to keep your deposit for up to 10 years to guard against future loss costs.
• Pitfall to this program, you are only as good as everyone in the group. Unlike the guaranteed cost program if your group or your company itself performs poorly with losses then you will have to re-anty deposit money to cover the collective losses.
• Pitfall to this program is that these types of insurance pools have a life expectancy. Generally underwriting guidelines loosen to accommodate more group members thus driving up losses and the collective cost.
The BBSI Program
• The BBSI program has the benefits of both the guaranteed cost program and the Self-Insured program without the pitfalls (providing your company qualifies for our company).
• BBSI's annual cost operates like a guaranteed cost program in the fact that you have a set mark-up on an annual basis regardless of your losses for that year.
• BBSI does not have a deposit pitfall providing you can substantiate 2 1/2 times your payroll cycle in a liquid format.
• BBSI also has the perks of a Self-Insured Group without the coinciding liabilities. With the BBSI program you have the ability to receive up to 1/3 of your premium annually in a safety incentive rebate (minus the cost of claims).
• BBSI is not a collectively pooled risk. This means that you are individually rated based solely on your loss ratio with a partner who has a vested interest to keep your costs down because we make more money.
• Looking at your premium as investment capital instead of a line item expense brings BBSI to the forefront. You receive a tangible ROI from BBSI on your premium investment in the form of HR Consulting, Safety & Risk Management, Payroll Processing and Aggressive Claims Management. If you don't utilize your investment (i.e. have claims) then not only do you get our suite of consultative services but also 1/3 of your investment back annually.
When evaluating your insurance options for your company and comparing what viable avenues are in today's market, BBSI would seem to me the obvious choice. Keep in mind that you still need to qualify for us by demonstrating a vested interest in safe practices and verification of substantial financial liquidity. In a volatile employer market like California, BBSI is the top choice to combat rising workers' comp costs and increasing volatility in employment regulations.
Rob Comeau I Director of Business Development I BBSI
Office: 949.255.5322 I Cell: 949.510.1126 I Fax: 949.255.5332
Rob.Comeau@bbsihq.com
There are two types of most commonly used insurance programs in the market: The guaranteed cost program and the self-insured group. The following are the benefits and pitfalls to both and below that is an illustration of how the BBSI model encompasses the best of both worlds.
Guaranteed Cost Program
• The guaranteed cost program or standard market insurance quote is the most commonly used insurance product for workers' comp. The benefits of the guaranteed cost program lye within the name. A guaranteed cost program means that you have a set amount of premium to pay regardless of current year losses. Example ($100K in premium with $150K in losses still equates to $100K in premium for the current year).
• Pitfall to this program is that based on the above example the client's future investment goes up as a result of an inflating ex-mod in the future.
• Pitfall to the program is the average deposit is 10% to 25% (though in many cases this deposit will be applied to the premium)
• Pitfall to the program is the only ROI is coverage. If you look at premium as investment capital as opposed to a line item expense then your only return on investment is coverage. If you have no claims then your investment is wasted annually and you have no tangible ROI.
Self-Insured Group
• The Self-Insured Group (a.k.a - group pooled risk, captive) is more common among larger employers or like industry groupings of companies. The benefit to this program is that you can leverage your cost by pooling your risk. In many cases you will also have the ability to get money back in some type of dividend program and should have some type of loss control assistance as well.
• Pitfalls to this program are that your deposit is normally much more substantial than the guaranteed cost market. The group also has the ability (and normally will exercise this right) to keep your deposit for up to 10 years to guard against future loss costs.
• Pitfall to this program, you are only as good as everyone in the group. Unlike the guaranteed cost program if your group or your company itself performs poorly with losses then you will have to re-anty deposit money to cover the collective losses.
• Pitfall to this program is that these types of insurance pools have a life expectancy. Generally underwriting guidelines loosen to accommodate more group members thus driving up losses and the collective cost.
The BBSI Program
• The BBSI program has the benefits of both the guaranteed cost program and the Self-Insured program without the pitfalls (providing your company qualifies for our company).
• BBSI's annual cost operates like a guaranteed cost program in the fact that you have a set mark-up on an annual basis regardless of your losses for that year.
• BBSI does not have a deposit pitfall providing you can substantiate 2 1/2 times your payroll cycle in a liquid format.
• BBSI also has the perks of a Self-Insured Group without the coinciding liabilities. With the BBSI program you have the ability to receive up to 1/3 of your premium annually in a safety incentive rebate (minus the cost of claims).
• BBSI is not a collectively pooled risk. This means that you are individually rated based solely on your loss ratio with a partner who has a vested interest to keep your costs down because we make more money.
• Looking at your premium as investment capital instead of a line item expense brings BBSI to the forefront. You receive a tangible ROI from BBSI on your premium investment in the form of HR Consulting, Safety & Risk Management, Payroll Processing and Aggressive Claims Management. If you don't utilize your investment (i.e. have claims) then not only do you get our suite of consultative services but also 1/3 of your investment back annually.
When evaluating your insurance options for your company and comparing what viable avenues are in today's market, BBSI would seem to me the obvious choice. Keep in mind that you still need to qualify for us by demonstrating a vested interest in safe practices and verification of substantial financial liquidity. In a volatile employer market like California, BBSI is the top choice to combat rising workers' comp costs and increasing volatility in employment regulations.
Rob Comeau I Director of Business Development I BBSI
Office: 949.255.5322 I Cell: 949.510.1126 I Fax: 949.255.5332
Rob.Comeau@bbsihq.com