Self-insurance costs fall into two categories, fixed and variable. These costs closely parallel the cost components of an insured program. But with a self-insured program you are paying the bills and will know what the individual costs are. To estimate your costs, you will need to know your workers' compensation standard premium and prior year's losses, both paid and reserved.
We have described the usual fixed and variable costs below as well as displayed them in Figure 3. Remember these are examples of costs typically found in self-insured programs. Your actual costs will vary depending on your individual experience, your state, and other factors.
State application or filing fees: these will vary from $100 to over $1,000.
Self-insurance bond: $15 to $45 per $1,000 of bond amount.
Letter of Credit: 1% to 2% of amount of LOC. (each state requires a bond or LOC as assurance that funds will be available to pay future claims).
Claims administration and loss control: 8% to 13% of standard workers' compensation premium (often charged "per claim").
Excess Insurance: 9% to 13% of standard workers' compensation premium (combined specific and aggregate coverage).
Claims: Paid as necessary. A qualified broker or insurance consultant can help you project estimated future claim costs based on your past experience.
State taxes and assessments: These also may vary by state, but are usually 1% to 4% of either incurred or paid losses or manual workers' compensation premium. In some states these are a set amount and would be in the "fixed cost" category.