An Approach to Ratemaking for Self-Insured Workers' Compensation for Both Individuals and Groups

Traditional actuarial techniques may not always produce appropriate pricing and reserving analyses for the self-insured market. In particular, potential self-insurers often have very limited historical data. The paper presents an overview of the various self-insurance mechanisms and discussions common limitations inherent in self-insures' data. An approach is then described, which is designed to be practical rather than theoretical, to develop pricing or reserving indication for a potential or ongoing self-insurer. This approach combines industry data with the employer's experience to provide a stable base for projecting future costs. Various data sources are described and their advantages and disadvantages are discussed. In addition to the development of loss estimates, the impact of discounting, risk margins, and program expenses is considered. The paper concludes with a description of how the model can be used to evaluate self-insurance program feasibility and estimate reserves. Workers Compensation