Magazine article Risk Management

Why Do Businesses Self-Insure?

Magazine article Risk Management

Why Do Businesses Self-Insure?

Article excerpt

Captives and self-insurance have been very popular with a wide range of business and public organizations throughout the world. Although there are many reasons why more and more businesses are self-insuring, five major factors stand out:

* It is intrinsically cheaper to assume losses that occur with predictable frequency and are within the funding capabilities of a company, rather than to rely on the conventional credit sources of commercial insurance.

* Insurance executives have gradually recognized that insurance company financing of predictable corporate loss is frequently not economically sound for either the insurer or insured.

* As business attitudes toward internal risk management have become more sophisticated, companies have become increasingly aware of the numerous financial resources and techniques available to manage risk.

* A self-insurance program may offer a better-quality product if the claims dealt with by in-house staff or judiciously selected external claims administrators are handled more expeditiously and with more sensitivity toward both employees and the outside public. …

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