Self- Insurance Guides
What is Self-Insurance?

"Self-Insurance involves a formal decision to retain risk rather than simply purchase it from a conventional commercial insurance company. Whilst the main objective of self-insurance is to save premium and improve a company's financial performance, self-insurance differs from standard insurance programs in that it requires a company to adopt many of the functions of a traditional insurance company. "

Across the world today, thousands of companies 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 then the potential benefits can include lower insurance premiums, improved insurance coverage, more reliable insurance, a safer workplace and an improved bottom line. looks at the most common forms of self-insurance in use today. We explain how self-insurance works and what the potential benefits to a company can be.

We provide information designed to enable companies to discuss its insurance needs with service providers armed with a basic knowledge of self-insurance and help them decide whether they might benefit from becoming self-insured.

How Self-Insurance Works

Self-Insurance has several key features that distinguish it from traditional insurance programs. Rather than taking a higher retention on a traditional insurance program, Self-Insurance requires the company to assume the role of an insurer. Because a Self-Insured company is liable for claims up to specified amounts, it has a direct financial interest in keeping losses and claims frequencies as low as possible. This is achieved through loss prevention and control, a greater awareness of its claims and the steps that can be taken to reduce them.

Making the Decision to Self-Insure

Before deciding to Self-Insure, there will be some specific areas that a company should look at to ensure that Self-Insurance is a viable proposition.

The Advantages and Disadvantages of Self-Insurance

Self-Insurance is by no means appropriate for every organization and a feasibility study will 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 a self- Insured approach.

Limiting Risk through the Self-Insured Retention

Most Self-Insurers are unable to accept responsibility for all losses as they could face financial ruin from adverse experience. Consequently, insurance and reinsurance programs can be purchased to protect the Self-Insured above a Self-Insured Retention. A Self-Insured Retention is the amount that the Self- Insured company or group keeps for its own account and is set according to each company or group’s appetite for risk as well as the availability of cover.