Self-Insured Companies Might Be Ahead of the Curve

Insurance Industry Financial Challenges Provide Opportunities for Companies to Save Money

Rising Costs: A Sign of the Times

Business owners know that rising insurance costs are part of our daily conversation.  Factoring this into the algorithm that computes the bottom line is a variable like no other.  The upward trend is real and understanding why it is climbing deserves our attention.  A white paper by Forbes Insights released in September of 2013 addresses several reasons why rates are rising and not surprisingly, they are complex and intertwined.  Fortunately, there are strategies to help mitigate these costs but understanding the basic causes may help you find the greatest savings opportunities.  

Challenges Faced by Insurance Companies 

For insurance companies, the days of relying on investment income to support operating costs and earnings are long gone for now.  As a result, pricing discipline, which has been lax in the past for the sake of market share, is back in vogue.  That means a focus on underwriting which necessitates higher premiums for consumers.

The trend toward higher premiums is predicted for some time.  The impacts of recent governmental regulation coupled with a weak economic recovery will take awhile to play out.  And even when the rate of investment returns does increase, the payoff for insurers is a long way off.  

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Another financial challenge for the industry is the rising cost of healthcare. This is acutely felt by property and casualty insurers in the worker’s compensation marketplace.  Statistics reveal the cost of medical care has risen over 380% since 1981.  Since this rate outpaces other costs, the disproportionate medical fees are forcing insurers to stabilize their finances by passing this on.    

Industry insiders also observed that claims tend to be extended during a weak economy.  In other words, when there are fewer employment opportunities available, people remain on claim longer.  This trend raises litigation costs as well as settlement costs for insurers as they have to work harder to get people off of claim. 

Conditions Create Opportunity

As premiums rise, consumers of insurance products will be looking for alternatives.  Some companies will also move away from traditional insurance and explore becoming self-insured.  This move, however, will force these companies to take a hard look at their own risk management practices in an attempt to lower their exposure characteristics.  

Self-Insured Companies Stay Ahead

As it relates to risk management, CSI has many self-insured companies as clients.  In particular, CSI’s surveillance division helps self-insured businesses resolve their Worker’s Compensation claims.  For many of our clients, we have become an integral part of their insurance risk management team.  Here are some observations of what a mature relationship looks like when we partner with our self-insured clients.  

1. They ensure that their claim administrators have an anti-fraud, waste and abuse (FWA) plan. 
2. They ensure their claim managers know red flag indicators of FWA and how to react to them.  
3. They are prepared to protect their fund from FWA by investigating suspect claims. 
4. They trust our expertise in surveillance operations and expect us to maximize their investment in resolving the claim.  
5. They understand that surveillance is just one tool used to investigate the legitimacy of claims and/or the actual condition of the claimant.
6. They know that fraud is determined in a court of law and not in a claim office.  
7. They only use surveillance results to evaluate the merits of the claim.  
8. They treat surveillance results as being highly confidential and only the people who need to know have access.  

We find that our best self-insured clients have chosen competent administrators who manage their fund.  We also note that these companies are genuinely concerned about their employees’ well-being and are aware of claim outcomes.  However, they also set the tone that abuse of benefits will not be tolerated.