Why might a business choose to self-insure part of their risk?

A business might choose to self-insure part of their risk primarily to gain more control over their claims process. By self-insuring, a company retains a portion of the financial risk instead of transferring it entirely to an insurance provider. This approach can lead to greater control over how claims are handled and the ability to manage cash flow more effectively.

Self-insuring often allows businesses to take a more proactive approach in managing and mitigating risks since they are directly invested in the outcomes. They can tailor risk management strategies to their specific operational needs and challenges. Additionally, self-insurance can reduce administrative costs associated with managing insurance policies and claims through third-party insurers.

While some companies may opt for self-insurance because they believe certain risks are minimal, the primary driver for many is the desire for control over their own risk management process. This strategic choice can also lead to potential cost savings over time if the retained risks do not lead to significant losses.