Support and Advice for Organisations to Self Insure

Self insurance can be ideal for many organisations, but it’s also a demanding task for business management. The knowledge base required is sometimes extensive, and a bit of professional advice and support is often useful to both clarify issues and make sure everything’s being done properly and in compliance with licensing requirements.

Self insurance management issues

Self insurance licensing is regulated in each state or territory. Licenses are issued on the basis of meeting strict but very business-friendly regulatory criteria. Because self insurance involves businesses taking on the financial and management responsibilities for workers compensation, it’s necessary that a full spectrum of management programs in these fields are implemented. These management programs are required to be statutorily compliant.

There are several fundamental operational areas to be addressed:

Risk management practices
OHS programs and operations
Financial management requirements
Workers compensation management
Functionally, this means that businesses must:

Prove the ability to provide financial support to the self insurance program
Put in place the required management programs
Operate a fully compliant OHS management system
Operate a workers compensation program in accordance with the requirements of the regulators legislation.
Assessing your needs

Cost effectiveness of self insurance is a major element of assessment. Self insurance is a particularly efficient form of workers compensation coverage for many employers. It’s an opportunity for businesses to take control of an important area of risk management. If you consider this an appropriate response to your insurance issues, the next step is to evaluate the self insurance management requirements involved.

All businesses are different, and all require appropriate management systems to qualify for self insurance licensing. The OHS and risk management insurance practices for your industry give a good rule of thumb guideline for assessing your requirements for self insurance, and the management systems involved.

Getting support and backup when you need it

The setup of a compliant self insurance system requires implementation of a range of management practices in compliance with law. It’s normal practice for businesses to seek the assistance of expert risk management consultants who specialise in this field to ensure approval of the self insurance license application.

The best health and safety management consultants can also provide management services for self insurance, including the very important safety audits, as well as compliance management and advisory services. These services are particularly valuable in terms of dealing with complex workers compensation licencing processes.

The other area of support commonly required is in terms of best practice risk management. OHS management systems are continually evolving and providing solutions to difficult workplace safety issues in all industries. Best practice risk management support provides a combination of real time expertise with operational issues and strategic management expertise.

Self insurance is a real option for employers who are working with a large workforce and want a clear cut, in-house management regime for OHS, industrial safety and workers compensation. Whatever the specific needs of a business, experience has shown that the combination of self management and good risk management is the right solution for employers.

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Insurance Analytics Software for Customer Benefits

Insurers have to deal with increasing competition, reducing profit margins, tightening regulations, consolidation and growing customer expectations day-by-day. Innovative solutions are much sought after to transform business performance through process enhancement and the customers are provided with a partnership model too to be employed with technical excellence and the domain expertise.

Direct Offerings from Subject Experts

Therefore, the IT companies offer insurance management solutions in the given domain from the assessment to planning stage and from implementation to developing applications and maintenance support. They have a talented pool of certified professionals who offer their services for outsourcing. The service providers hire subject matter experts who come with good knowledge in retirement, life and pension plans along with updates on casualty, health insurance and property. The diverse knowledge base of these experts combines with the extensive experience in technology, domain, test methodologies and tools to overcome business challenges.

Only to Meet the Needs

The IT industry provides enterprise insurance solutions to meet both the business requirements as well as technology challenges of their clients. These types of applications fulfill the purpose of being highly flexible and the best quality solutions that are easily deployable, highly secure and are easy to maintain owing to the component based designs to offer time-to-market benefits. As far as the maintenance services are concerned, the applications keep on evolving due to changing business requirements, improved performance, reduced system downtime and thus, enhance the life of applications. Now-a-days, the software companies focus more on the business essentials that frees them from tending to the routine tasks.

Deriving Benefits Out of IT

The service providers strictly adhere to regular governance and SLAs at both the delivery and project level. What the insurance sector finds challenging is an inflexible and highly integrated IT system. In the end, the client benefits from improved efficiency, greater integration and optimum operational costs with better infrastructure utilization. Such results are possible only due to the software experts who come with good amount of experience in improving application performance from the existing systems. Therefore, these types of solutions can be explored for legacy modernization, data warehousing and reporting, channel management, claims processing as well as new enterprise management.

Robust Analytics for Organized Data

The whole business of insurance is dependent upon assessing risk accurately. Insurers have huge data collection that is available in different forms. They need to organize scattered, unstructured and structured data into a valuable piece of information to make informed decisions, build descriptive and predictive analytics for perceptive insights. Analytics solution for insurance enables timely data access, robust analytical assessment and consolidated information to derive measurable business value. Therefore, we can say that iAnalytics are customizable and flexible enough to get the related analytics on demand.

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Self Insurance Basics – What it is and How it Works

Self insurance is defined as setting aside funds to cover the insurance requirements of a business or organization. This is a viable method of self funding risk management, but it comes with some caveats, statutory obligations and a need for a good working group of management systems.

The self insurance option

Self Insurance is regulated by law, giving exemptions employers from compliance with a range of statutory obligations relating to workers compensation insurance. A licensed employer doesn’t pay insurance premiums for workers compensation. They manage their own risk and control compensation claims administration for their employees.

There are good financial and administrative reasons for this approach. The suggested viable size for self insurance for Australian employers is 750 employees. This is a large number of people, and the premiums involved can be significant outlays. In effect, the employers take on the liabilities for workers compensation on the basis of assuming responsibility for coverage.

This is an efficient and popular method of dealing with workers compensation. It’s also very practical, and allows employers to manage the costs and issues in-house. The actual statutory requirements are based on clear cut regulations, and licensing is administered by the various regulators.

Self insurance in practice

In practice, self insurance needs a level of customization in relation to the type of industry of the employer.

There are two basic fields of administration:

• Employee programs: A series of programs regarding workers compensation, injury management and return to work are part of the standard mix of in house operations. OHS management systems, on-site injury management practices and appropriate industry-specific of workplace safeguards are also required.

• Financial management: The financial aspects of self insurance are based on audit criteria established by statute. The employer must provide information demonstrating the financial state, sufficient to prove that the business is able to meet the required performance criteria for self insurance. This requires evidence of an ongoing ability to meet the financial obligations of self insurance. The employer must have sufficient capital to underwrite, pay and administer claims.

Note: A self insurer’s license will not be granted unless the regulator is satisfied that the employer is fully compliant.

Basic self insurance management

Although self insurance management can look complex at first, it’s based largely on basic common sense business practices. Compliance with statutory requirements is unfamiliar territory for most businesses, and ensuring compliance is absolutely essential for self insurers. Many businesses outsource their administration functions in this area, engaging professional safety consulting advisers to manage these functions.

The best safety consultants also provide the full management spectrum for self insurance.

These services include:
• Compliance management
• Safety consulting
• Safety management systems
• Risk management
• Audit programs

Self insurance is rapidly becoming the preferred option for major employers. If you’re considering self insurance, a professional consultancy will be able to provide useful advice regarding your needs.

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Low Cost Health Insurance – Managing Risks

There are always people who think that they don’t need any form of health insurance. That is because they are naive to think that accidents or illnesses won’t befall them. So there is no need to manage such risks. Then there are those who believe that they are well off enough to handle the risks, should they be unfortunate. The problem is, their estimation for medical bills are way off. Most people are not conscious of the rising cost of medical bills, and they have very little how a serious illness can affect the financial cash flow of the family. Imagine the following situation.

A family of four depends on the father for a living. The mother is a full time homemaker, and stays at home to take care of the children. This sounds like a typical family. If nothing goes wrong, the family has a happy lifestyle. The father goes to work, brings money home, and put food on the table. Occasionally, there may even be some extra cash for a family vacation.

But if something unfortunate happens to the breadwinner of the family, everything falls apart. The responsibility then falls heavily on the spouse to keep the family together. But with the sole breadwinner gone, where is the money going to come from? Even the strongest person need some time to cope with the transition.

That is where health insurance comes in. Health insurance can help protect the family in the event of unfortunate accidents of illnesses. A serious illness, such as cancer, can incur heavy medical bills. Often, family members are at a loss of how to come up with such a huge sum of money to pay for the bills. If there is some kind of health insurance plan in place, the insurance company will take care of all, or most of the bills.

Without adequate insurance coverage, the family members not only have to worry about the health of the affected member, but they also have to worry about coping with the financial setback. Therefore, it is wise to manage the risks and provide a safety net for the family.

Contrary to popular belief, health insurance does not have to be expensive at all. There are many types of plans available, and the premiums vary greatly. If budget is a concern, an individual can always consider taking up a low cost plan, and then upgrading later. Having a small policy is still better than having no policy.

A low cost health insurance plan usually means that the policy holder has to be responsible for a larger amount of deductible. Deductible is the amount that the insured has to pay first, before submitting a claim. For example, if the bill comes up to $5,000, and the deductible is $1,000, the insured has to pay the initial $1,000, and claims the rest from the insurance company. Still, this is better than having zero protection, for it places a ceiling on the amount of money that the insured has to pay.

If budget permits, try to take up a larger policy with more comprehensive coverage. Deductible for such policies are usually much lower, and the coverage amount is also larger. Having adequate protection gives everyone peace of mind.

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Getting the Paperwork Right With Self Insurance

Paperwork may not make the world go round, but it can use up a lot of time and patience. For busy people, paperwork needs to be pinned down, and an efficient management system needs to be in place to do it. There are a few ways of doing this, internally and externally. The “admin factor” in self insurance requires a level of expertise, and management needs to decide the best fit for its operations.

Doing your paperwork in house issues

The main issues with self insurance administration are twofold:

Administration costs and efficiencies: There’s an obvious dichotomy for business in terms of administration costs in specialised areas. The work must be done, but it’s also resource intensive in some cases, particularly when the work is undertaken by in-house professionals whose jobs are designed to cope with workloads generated by the business. In house management may or may not be cost efficient, based on the requirements of the workload.
Accounts and financial management issues: Self insurance is a financial management issue, and it is necessary for the business to conduct its self insurance operations according to statutory requirements. Input from financial managers is required, and in-house reporting systems are involved. However, the justification of costs in terms of additional resources committed to paperwork is also a potential issue.
External support- A working option

External support eliminates any additional requirements on internal administration, while retaining the valuable reporting functions of the self insurance management scheme. External services provide all the information required for financial management, allowing the financial managers to deal with issues without the added burden of administrative costs and resource issues.

Expert assistance from risk management consultants also provides a very useful administrative backup for managers who need to deal with the sometimes complex issues raised by self insurance. The external support approach covers all angles seamlessly, creating a good ongoing management methodology.

Figuring out the best approach

Best practice for self insurance administration consists of several stages of development and related options:

Consultants are engaged to set up the self insurance programs and systems. They provide a full operational schematic. These consultants also provide a full range of monitoring and safety management system support service.
Businesses may administer these operations themselves, or retain the consultants for both administrative and advisory purposes.
Businesses that administer their own self insurance engage consultants as required to upgrade their safety management systems and undertake safety audits.
Option 1 is basically an outsourcing approach, eliminating the administrative costs and creating a working management system.

Option 2 may be appropriate for businesses which are able to manage the administrative issues but still require support and advisory services.

Option 3 is a compliance-based approach, ensuring both reporting and proper conduct of self insurance administration on a needs basis.

The best options are chosen for cost-effectiveness and a good fit with the administrative and financial management needs of businesses. External services improve self insurance management efficiency greatly, whichever option is preferred.

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Project Risk Management and Assurance

Why do so many organisations embark on high-risk projects without demanding robust project assurance?

Projects fail for many reasons. Recent global studies indicate that inadequate risk management is a common cause.

Successful project managers aim to resolve high levels of exposure before they occur, via systematic risk management processes.

Many projects are inherently exposed to myriad risks and are often significant in scale, complexity and ambition. Delivering large-scale projects can often be adversely impacted by a bias towards being over-optimistic.

Imperfect, insufficient or inadequate data increases exposure that often results in over-estimating benefits and under-estimating costs.

Managing macro and micro-level events related to achieving project deliverables, whilst balancing the needs of many stakeholders, has become increasingly important.

Assessing risks at both portfolio and work-stream levels helps increase confidence that risks are understood.

Projects are often prioritised relevant to their levels of perceived exposure and one has its own risk profile.

Project Risk Management

Project risk management focuses on identifying, analysing and responding to project events.

It should be designed to systematically identify and manage levels of uncertainty and potential threats to delivering project objectives successfully.

Risk management processes should be iterative throughout a project’s life-cycle and embedded in project management planning and activities. Smaller projects often require minor work and periodic monitoring.

Complex projects need formalised processes to analyse, manage and report risks.

Good reporting relies on clear descriptions of all exposure, their impact on the projects, and potential costs for mitigation and inaction.

This helps ensure project personnel understand the potential impact risks may have on projects’ success and have prepared strategies to minimise negative consequences.

Problems occur when there is limited visibility of risks at project and portfolio levels or approaches to risk-management are ad-hoc and inconsistent.

Further problems can arise when risks are identified but recorded at a very high level accompanied by highly subjective risk ratings, rather than being the result of more substantive risk assessment.

When these problems arise, an organisation would benefit from clearer, more formal and wide-spread processes for capturing and monitoring risks.

Project and Portfolio Risk Assessments

Project and portfolio risk assessments should be undertaken to understand their risk profiles and associated threats in achieving business objectives.

Assessments should identify the action plans to address the risks identified and allocate executive responsibility to manage them. Additional risk assessments should be carried out on selected projects (perhaps by prioritising them by value or complexity).

Risk management processes should be on-going and monitored throughout a project’s life-cycle.

Regular risk reports would provide Project Sponsors, Senior Responsible Officers and Steering Groups with better visibility of projects’ risk profiles.

Whether you’re responsible for overseeing or managing a project, robust project assurance will help you address the risks that threaten its success.

Mark Gwilliam FCCA CA is the founder and Director of Business Advisory Services.

From humble beginnings, the firm has grown from strength to strength.

It has matured from a small accounting and tax services practice to one that helps small business owners, entrepreneurs and executives navigate complex challenges; including strategy, risk management and internal audit, managing shared-service centres and operations.

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