If you self-insure, your costs are the benefits that are paid out to the injured employee. You're paying the true cost of what your actual claims are, as opposed to the insurance premium with markups for the insurance company's expenses. You're paying the true cost of your claims. Ferguson of the SIIA estimates that 500 such pools exist nationwide. Smaller companies can viably self-insure through a group workers comp situation.
All payments come out of the employer's pocket.
If you're hit by a wave of claims, or by one major accident that results in many claims, that could be a major financial disaster. Stan Smith, risk management director at Boyd Gaming Corp., a Nevada casino company, says self-insurance works for his company because the employer can take control of the workers comp program. Smith believes that having a third party handle workers' injury claims can create problems between employees, management, and the insurer, with the employee caught in the middle. With self-insurance, there's no middleman, giving the employer greater control over workers comp practices and programs. Self-insuring works well for industries with high losses per employee.