A self-insured organization needs a(n)

A self-insured organization needs a(n)

• A. Recordkeeping system to track its self-insured claims.
• B. Workers compensation or auto liability loss exposure.
• C. Third-party administrator (TPA).
• D. Informal retention plan.

Answer: (A)

Taking on self-insurance means the organization is financially responsible for its own losses rather than transferring those losses to an insurer. To do this effectively, it must have a robust recordkeeping system that tracks every self-insured claim from filing to disposition, records the amounts paid and the reserves set aside, and shows the current status of each claim. This data is essential for budgeting, funding the losses, and financial reporting, and it enables trend analysis and proactive risk management. Having loss exposure like workers’ compensation or auto liability exists, but merely recognizing those exposures isn’t enough to manage them. Using a third-party administrator is optional, not required, and an informal retention plan lacks the discipline and data needed to properly govern and fund self-insured losses.

Taking on self-insurance means the organization is financially responsible for its own losses rather than transferring those losses to an insurer. To do this effectively, it must have a robust recordkeeping system that tracks every self-insured claim from filing to disposition, records the amounts paid and the reserves set aside, and shows the current status of each claim. This data is essential for budgeting, funding the losses, and financial reporting, and it enables trend analysis and proactive risk management.

Having loss exposure like workers’ compensation or auto liability exists, but merely recognizing those exposures isn’t enough to manage them. Using a third-party administrator is optional, not required, and an informal retention plan lacks the discipline and data needed to properly govern and fund self-insured losses.