self insurance introduction
* self insurance is best suited for businesses that are..
- committed to risk control - can tolerate risk retention - devote capital/resources to finance/administer their self insurance plans
how is ERISA funded for self insured health benefits?
- employers contribute to offset plan costs - use 3rd party administrators - use excess insurance
in addition to self insurance using business cash flow/assets, what are the other general characteristics?
- formalized payment system - record keeping
a informal retention plan vs self insurance?
- general cash flows vs business set aside cash flows/assets - no formal record keeping system
when considering self insurance, a firm must
evaluate the cash flow benefits against tax considerations
what is self insurance usually combined with to cover high severity losses?
excess liability insurance
self insurance is best suited to what type of losses?
high frequency and low severity and long-tail losses (auto, WC, liability), and ones that are PREDICTABLE!!!
what is a type of retention in which an organization pays for losses with its cash flow and/or assets and generally keeps no records of losses?
informal retention
what is the employee retirement income security act
lets business self-insure health benefits than buy healthcare insurance
what is a loss retention plan that uses the business's cash flows and current assets to pay for losses?
self insurance
purpose of self insurance (very general concept)
self insurance lowers long term risk by paying for own losses and also they avoid insurance transaction costs
self-insured loss vs insurance premiums - when is tax deducted?
self-insured loss - tax deducted when losses are paid insurance premiums - tax deducted when incurred
self-insurance is not suitable for high severity losses because...
they're too hard to retain and unpredictable
self-insured health benefits involve...
ERISA - employee retirement income security act
pretty much in general, self insurance insured - what do they do with losses?
adjust/pay losses up to a certain amount
