This not only provides a source of investment income but also contributes to better cash flow management. Companies that self-insure maintain reserves for workers’ compensation claims, earning interest on those funds until they are needed for claim payments. Improved cash flow management is an additional benefit of self-insurance.This enables companies to focus on areas of higher risk and deploy targeted safety measures, ultimately reducing the number of injured workers and severity of workers’ compensation claims. By managing their workers’ compensation program, companies can design and implement risk management strategies specifically tailored to their unique operations, industry and workforce. Customized risk management is another compelling reason for companies to self-insure.Whatever level of control is chosen, it often translates into better outcomes for both the company and the injured workers, as the company can ensure timely and appropriate care while managing costs effectively. Or, if a third-party administrator is hired to handle claims management, a degree of control is still assured as the TPA takes their direction from the self-insured. Self-insured companies can directly oversee claim investigations, settlements and medical treatments, allowing for a more efficient and tailored approach to addressing workplace injuries. A significant advantage of self-insurance is the increased control it provides over claims management.
Self-insureds create this advantage in numerous ways: Companies that self-insure in essence cut out the middleman and retain the net profits that they would pay to an insurer as part of their premium payments. By directly managing their workers’ compensation risks, companies with strong safety records and low claim frequencies can often achieve lower overall costs compared to purchasing insurance from commercial carriers. The main reason companies opt for self-insurance is the opportunity for cost savings. For many companies, self-insuring their workers’ compensation programs is a strategic decision driven by the potential benefits it can offer over traditional insurance policies.
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