An Introduction to Self-Insurance
Today, thousands of companies across the United States are benefiting from an alternative way of buying insurance to protect their businesses and their employees. The process is known as Self-Insurance and if it is right for your business.
Self-Insurance first became established in the 1960s as an alternative to traditional insurance. Companies facing increasingly high premiums on their business began searching for solutions that would improve their cash flow and reduce their insurance costs.
Self-Insurance has various key features that distinguish it from traditional risk transfer programmes. As opposed to simply taking a higher retention on a traditional insurance program, self-insurance is all about assuming the role of an insurer but at the same time endeavouring to keep losses as low as possible through prevention and loss control.
Self-insurance is by no means appropriate for every organisation and feasibility studies play a role in determining the suitability of self-insurance. Prior to performing such a study a prospective self-insurer will need to be aware of both the advantages as well as the disadvantages of adopting the self-insured approach.
Self-insurance is by no means appropriate for every organisation and feasibility studies play a role in determining the suitability of self-insurance. Prior to performing such a study a prospective self-insurer will need to be aware of both the advantages as well as the disadvantages of adopting the self-insured approach.
Generally all classes of insurance risk are suitable for self-insurance providing that the premiums are high enough to offset the cost of maintaining a self-insured program, overall losses are sufficiently low and exposure to unexpectedly high losses can be controlled. Some types of risk that protect against injury to individuals have special self-insurance legislation as these coverages are required by law.
