Self-Insurance

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					Self-Insurance
Risk Management Objectives

    Have employees & customers go home
    unharmed
    Save money
    Make uncertainty tolerable
    Prepare for the unexpected (emergencies)
    Comply with laws & regulations
    Maintain a good reputation
    Improve productivity




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Multnomah County
                                                   Self-insurance has saved
                                                   Multnomah County over
                                                   $10 million in the last six
                                                             years.




    $8,000,000
    $7,000,000
    $6,000,000
    $5,000,000
    $4,000,000
    $3,000,000
    $2,000,000
    $1,000,000
           $0
                 2003-04   2004-05    2005-06      2006-07   2007-08   2008-09

                              Self-Insurance    Insurance




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Portland Public Schools                      In 2009, self-
                                           insurance saved
                                            Portland Public
                                                Schools
                                               $893,000.
    Comparison of Fully Insured to Self-Insured



        Insurance                   $5,504,218




    Self-Insurance   $4,611,662.0




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     Utility ($35 million annual revenue)


                       Self Insurance Cost vs.Retro Premium

$400,000
$350,000                                                           Self-Insurance
$300,000                                                           Retro

$250,000
$200,000
$150,000
$100,000
 $50,000
     $0
           1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008




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             Loss Potential



Not Severe                      Severe



Retention         Significant            Catastrophic



                              Retention             Transfer



                                Hybrid
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    Retention


                    Current Expensing



                         Deductibles



                 Self-Insurance > $250,000



                Funded                 Unfunded

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    Hybrid

             Retrospective Plans


               Captive Insurers


                    Pools


             Finite Risk Insurance


             Insurance Derivatives

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Rules of Thumbs for Retention


         Premium Savings – Expected Losses
                Increase in Deductible
                Should be above 15%



     2% - 5% of working capital (operating budget for
     public entities)
     1% of total assets
     1% of total revenue over 5 years


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Rules of Thumbs for Retention

         Premium Savings – Expected Losses
                Increase in Deductible
               Should be above 15%

     Looking at increasing property retention from
     $50,000 to $100,000
     In past 7 years, only 1 loss over $50,000 and it
     was $1.5 million.
     Premium savings: $20,000

               $20,000 - $7200 = 24%
                  $50,000

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Why Self-Insurance

     Save money: (insurer overhead, insurer profits,
     agent’s commission, fees, premium & residual
     market taxes)
     Insurance may not be available/poor
     coverages/unreasonable prices
     Ability to control claims
     Can enhance loss prevention




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Factors To Consider

     •   Ability to Manage Risks
     •   Tolerable uncertainty of management
     •   Loss Control
     •   Potential savings
     •   Lenders, rating companies
     •   Customers
     •   Contracts
     •   Competitors
     •   Legal requirements
     •   Captive


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Factors To Consider

     •   Actuarial evaluations
     •   Financial Accounting
     •   Taxes
     •   Claims management
     •   Excess Insurance
     •   RMIS
     •   Financial condition/cash flow
     •   Medicare reporting
     •   Long term commitment



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Feasibility Analysis

     10 year look back
     Forecast future claims (may use an actuary)
     Consider all the prior factors




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    Recommended Against Self-Insurance


                         Self-Insured
$400,000                 Fully Insured
                         Retro
$300,000

$200,000

$100,000
         $0
               FY   FY   FY   FY   FY   FY
              2008 2007 2006 2005 2004 2003

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Self-Insurance Thoughts By Line

Workers’ Comp:
 Bond/Letter of Credit
 Excess Insurance
 Higher Experience Mod the more tempting
 Retro currently a very good option
 Contact Jody Howatt
 (jody.c.howatt@state.or.us)

Auto Liability:
  Must of authorization of state
  A fleet of more than 25 vehicles
  Must provide uninsured motorist coverage

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Self-Insurance Thoughts By Line

General & Professional Liability:
  No state approval required
  Proceed cautiously

Dental & Vision:
  Just do it

Medical:
  Be cautious
  A long term commitment
  Be prepared for bad years

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