Is self-insurance right for my business and am I eligible?

Self-insurance is a workforce risk strategy where an organisation applies for a license to manage its own losses for workers’ compensation claims, as an alternative to paying premiums to a WorkCover Agent or insurer.

The laws and guidelines vary between jurisdictions, with over 29 Acts and Ordinances governing self-insurance across Australia. Some criteria to administer self-insurance relies on an assessment of the organisation’s business performance, safety record and claims history.

It is a complicated topic, but something well worth considering, particularly for large employers.

In a nutshell, self-insurance can give employers far greater control over their money.

Under conventional or underwritten policies employers pay premiums before any claims are made. With a self-insurance program, however, no money is paid until the claim actually occurs.

In some cases claims take time to settle, so businesses save their money until the claim is actually payable, which in turn facilitates a higher degree of cost control.

Self-insurance has the added benefit of providing strong incentives to control workers’ compensation losses through disciplined safety management and injury prevention practices. These are required in order to meet the necessary standards to be licensed as a self-insurer, and significantly improve workforce productivity.

The question of whether self-insurance is viable for an employer requires an assessment of the organisation’s business performance, safety record and claims history.

There are strict eligibility requirements, and regulation around management of the scheme differs from state to state, and a formal application process required in order to be licensed as a self-insurer.

To qualify for self-insurance, an employer needs to be paying premiums at a minimum of the amount specified in that jurisdiction, and meet FTE (full time equivalent) requirements that vary between jurisdictions. Below we’ve included a guide to the FTE requirements by jurisdiction.

  • NSW 500 FTE
  • QLD 2000 FTE
  • SA 200 FTE
  • Victoria 500 FTE
  • Comcare 500 FTE

The legislative requirements also vary in each jurisdiction, covering the guidelines and safety management requirements. 

Self-insurance is complex, but can have practical cash flow benefits for businesses that are in the position, both financially and from a compliance perspective, to manage their license.
The requirements are quite strict, both around the prudential and legal requirements to be awarded a license, and the ability to administer claims.

Partnering with a self insurance specialist like GB means that you can be sure that you will be able to realise the financial benefits available. If you would like to know more, get in touch with GB today.

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