Taking good care of your volunteers and employees and maximizing your department’s finances are critical to your success. It is important to understand the “Pros and Cons” of whether to choose a self-insurance program or insurance through Fire Districts of NY Mutual Insurance Co., Inc. (FDM) for Volunteer Firefighters’ Benefits Law (VFBL) and Workers’ Compensation coverage. The summary below provides important factors for you to consider.
FDM has been around for 45 years and is owned by our policyholders — i.e. YOU. We are solely dedicated to the well-being of volunteers by providing VFBL and Workers’ Compensation coverage in New York State. We would like the opportunity to discuss coverage and provide VFBL and Workers’ Compensation to the volunteers and employees of your district.
| Insured by FDM | Qualified Self-Insured Programs | |
| LOSSES | Our program is fully insured, FDM pays all claims and losses. | Insured (county or district) pays all losses and seeks reimbursement from excess carriers for payments above specific claims retention. |
| QUALIFICATION | The only qualification is the ability to make premium payments. | Must apply for approval in each state where self-insurance is desired; subject to minimum requirements on number of employees and net worth of insured. |
| CLAIMS ADMINISTRATION | FDM controls all vendor selection and claims handling decisions; the insurance company administers all claims and regulatory compliance concerns. | Insured (fire district) has full responsibility for vendor selection and all claims handling decisions. Claims handling is almost always unbundled and some programs allow for self-administration. Self-administration must manage, settle, and account for all claims processes, including regulatory compliance issues with NYS and the New York Workers’ Compensation Board. |
| COLLATERAL | Financial collateral is not needed. | Individual states are usually flexible on forms of collateral. Certain states have alternative collateral programs, which could result in lower collateral compared to large deductibles. Very little ability to negotiate the amount of collateral, and legacy collateral after QSI termination can remain in place for years. QSI loses the advantage of aggregating collateral with a single source as each state requires separate collateral. |
| ADMINISTRATIVE EXPENSES | FDM is responsible for making appropriate state filings and paying assessments that are contained within the guaranteed cost premium. | Administrative items are the responsibility of the insured (fire district) including applications, certificates, and assessment payments. If assessments are loss-based, the insurer must accrue future assessments based on anticipated future claim payments. |
| CONCENTRATION OF EMPLOYEES | Individual account underwriting | Individual account underwriting, but in certain cases excess policies can offer stated limits versus statutory cover. |
| EMPLOYER LIABILITY | Covered claims are fully insured, subject to policy limits and statutory requirements, and are the responsibility of FDM. | There is NO duty to defend, so disputed cases may not have coverage for defense costs. Employers’ liability claims have different policy limits than workers’ compensation claims. |
| CASH FLOW | The insured (fire district) only pays the annual premium. | Insured (fire district) pays all claims and may be reimbursed by excess insurer for payments above specific claims retention. TPA (if used) and insured agree on the structure of the claims payment escrow fund with zero-balance accounts being an option. |
| GUARANTEE FUND | Ability to access NYS guarantee funds if FDM were to default (determined individually by the net worth of the employer). | Insured (fire districts) are responsible for ALL claim payments, regardless of excess carrier’s ability to pay. If individual QSI defaults, there is a separate guarantee fund. Assessments for the QSI guaranteed fund are dictated by the liabilities of the fund. |
| MARKETS FOR COVERAGE | Insurance is readily available for small/mid-size fire districts. | There is a very limited marketplace for excess coverage, with one insurer writing approximately one-third of the standalone market. Many insurers have minimum retention and premium levels. |
| Additional Concern for Qualified Self-Insurance Programs (QSI) | |
| NEW YORK | Not subject to depositing all awards into the aggregate trust fund. Deductible employers must do this. This may severely inhibit the ability to settle claims. |
Please note any recommendations, analysis, or advice provided by FDM are not intended to be taken as advice regarding any individual situation and should not be relied upon as such. This document contains proprietary, confidential information of FDM and may not be shared with any third party, including other insurance producers, without FDM’s prior written consent. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as an insurance company and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. Any modeling, analytics, or projections are subject to inherent uncertainty, and the FDM analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete, or should change. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Except as may be set forth in an agreement between you and FDM, FDM shall have no obligation to update the analysis and shall have no liability to you or any other party regarding the FDM analysis or to any services provided by a third party to you or FDM. FDM makes no representation or warranty concerning the application of policy wordings or the financial condition or solvency of insurers or re-insurers. FDM makes no assurances regarding the availability, cost, or terms of insurance coverage.