The Unique Features of Self-Insurance

The unique features of self-insurance are often summarized as follows:

Retention of Risk

A Self-Insurer is responsible for all of its losses but normally purchases excess protection, often known as specific and aggregate coverage, to limit its potential maximum losses. The retention of risk reduces the premiums that would normally be paid to traditional insurers as profit margins and administrative expenses that would normally be included in an insurance premium are removed.

Administration

Self-Insurance requires formal procedures for the processing and payment of claims to be established, often through an outside Third Party administrator.

Book-keeping

Self-Insurance requires that procedures are set up to monitor performance of the program. Monitoring losses plays an important role in loss prevention, as trends can be identified and dealt with efficiently.

Loss Prevention

New procedures are often established by a self-insurer to reduce the possibility of losses, or to manage them once they have occurred.