How to Reduce Premium Costs with Slider and Corridor Deductibles
Sliders & Corridors: Two Alternative Deductible Programs for the Staffing Industry
Insureds have a myriad of ways that they can choose to structure their workers’ compensation programs. The option chosen depends on several variables, including the amount of payroll, standard premium, experience modification factor, loss history, collateral requirements and risk tolerance.
Today, however, let’s talk deductibles – specifically, two different alternatives to a traditional large deductible insurance program: sliders and corridors.
Most insureds are familiar with the concept of a large deductible program, where a loss pick is utilized to pick a per claim deductible, typically between $100k-$500k per occurrence. Slider and corridor programs utilize two deductible triggers within the same insurance program, instead of one. The difference is in how the second deductible applies.
A slider deductible is a program structure with a baseline deductible for all claims with a higher deductible applying to the single largest claim occurring in that policy year. For example, let’s say that an insured has a $500k retention on their program with a slider up to $750k. This insured has 4 claims with the following incurred values: $50k, $75k, $400k and $850K.
In this example, the insured would be responsible for paying 100% of the $50K, $75K and $400K claims (as they are all under the $500k deductible), and $750k of the $850K claim (as the single largest claim is subject to $750k deductible).
A corridor deductible (or self-insured retention) is applied in a similar manner; the difference being that instead of the second deductible being applied to the single largest claim, it’s applied in the aggregate to all claims that breach the first deductible layer, within any single policy term.
Factors to consider in implementing either of these two deductible arrangements include:
- Historical loss stratification
- Premium off-set for assuming greater retained risk
- Additional collateral requirements, if any
- State and classification code mix
- Strength of insured’s balance sheet
Staffing companies have become more accepting of slider and corridor deductible program options as a way to reduce premium costs without assuming an appreciable amount of additional risk.
If this sounds like an option that may make sense for your company, contact a member of the ‘A’ Team to complete a further review.
- Deductibles: Controlling Risk and Cost
- Making the Leap to a Loss Sensitive Workers’ Comp Program
- Staffing Case Study: Navigating from an Assigned Risk Pool
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