04 Jul Is It Ever Wise To Manage WIBA Internally?
We have argued elsewhere that there are clear risks associated with carrying your WIBA risks internally. However, there are some exceptional circumstances that may make managing WIBA internally a fairly reasonable prospect.
The Act allows you to choose between buying an employer’s liability policy insurance or carrying the risk internally. Upon reflection, we have identified three situations that can make it more reasonable to carry your WIBA risks internally.
When your company does not have fixed working premises
WIBA comes into force when you have a fixed working premise, and ferry your employees to work. By far, most companies operate like this and is the norm. However, a growing number of companies no longer use a fixed premise and allow their workers to telecommute.
This drastically reduces the risk profile of such companies that carrying WIBA internally becomes a fairly reasoned alternative. Without workers meeting in one place, and without the need to transport workers around, the two risk locations are eliminated.
That said, the company must still make an undertaking with the WIBA director to show that its able to meet its WIBA liabilities
When the Cost of Premiums is prohibitive
Some companies may find the cost of WIBA prohibitive especially in situations where the company has a large number of employees. Insurance works on the basis of pooling of risks, and as such. A large number of employees creates sufficient numbers to pool the risk internally.
A company can set up its own WIBA fund if it finds that administering this fund is more cost effective compared to paying premiums to an insurance company.
Therefore, any company with a large enough number of employees that make the pooling of WIBA risks possible should consider setting up an internally managed WIBA fund.
When you have the internal capacity to Administer WIBA
The third circumstance where a company can decide to handle WIBA internally is any company that has the capacity to manage WIBA internally. Capacity in this case refers to both the financial and technical capacity to handle WIBA demands.
Some companies have the revenues that make it possible for them to foot any bills related to WIBA should they arise. In addition, the companies may have the ability to administer WIBA effectively. Such companies can take advantage of this capacity to manage their WIBA risks internally.
The point here is that premium payment is a consistent cost while internal management means that payouts will be made only if an incident occurs requiring such a payout.
Disclaimer: WIBA is a legally instituted requirement and hence any decisions made regarding its management should be made based on the advice of legal professionals. Insureafrika does not offer legal advice.