Product Update

Small Deductibles and Cash Flow Plans Discussions Updated in Risk Financing


This release of Risk Financing updates the table of state guidelines for small deductible plans and the discussion on "Cash Flow Plans."

In the late 1980s, only seven states had approved the use of deductible plans for workers compensation. Since that time, the plans have become very popular with insureds and insurers. Now, nearly all nonmonopolistic states have approved bureau-promulgated deductible plans or have passed legislation to allow insurers to file their own plans. The plans typically have deductibles ranging from $2,500 to $75,000, depending on the state. For this reason, bureau-promulgated plans are commonly referred to as "small deductible plans." The "Workers Compensation Deductibles" section provides a discussion of the plans and includes an updated exhibit summarizing some specific provisions in each state's regulations.

Cash flow plans allow insureds to retain the use of funds rather than pay insurance premiums up front. Such plans include the following.

  • Deferred premium plans
  • Lag of payment plans
  • Reduced premium deposit plans
  • Depressed premium plans
  • Net present value plans
  • Interest on funds plans
  • Chronological stabilization programs
  • Paid loss dividend plans
  • Compensating balance plans

These plans are discussed in more detail in the updated "Cash Flow Plans" discussion.

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