Question

During a "hard" insurance market, a manufacturing company decided to self-insure its workers compensation loss exposure. The company hired a third party to administer the workers compensation claims. Even though the risk was being self-insured, the risk manager insisted that the third-party administrator maintain meticulous records. When asked why such detailed records were necessary, the risk manager replied, "So we have a good story to tell an insurance company next year. What did the risk manager mean?

Answer 1

Answer:

The manager wants documentary evidence that self insurance reduced cost than that which would have been incurred if the company used third party insurance services.

Explanation:

Self insurance is defined as a situation where a business does not engage services of a third party insurance company, but rather bears some of the risk of loss. For example when a company bears health costs.

In this instance the company has decided to self insure with respect to worker's compensation loss exposure.

A business that self ensures during a hard insurance market wants to reduce the amount it will pay on premiums to insurance companies. Also underwriting standards are tighter.

The risk manager wants to prove that self insurance comes at a reduced cost to the company. This evidence will be presented to insurance underwriters and be used to gain lower Premium. That is why he said "So we have a good story to tell an insurance company next year."

Answer 2

Answer:

During "hard" insurance market, the insurance of property and obligation vacillate between high rates and tight endorsing guidelines. This makes moderateness of insurance hard for organizations. At the hour of taking choice with respect to the maintenance and move, the superior sum should be considered at endorsing standard and premium rates. In the given case the organization picks self-insurance because of the less moderateness and accessibility of insurance inclusion. On the off chance that it keeps up a fastidious record, at that point the supervisor would have detail data about the maintenance and move of hazard.