Self-insurance for school districts
Self insurance in school districts helps in cost savings whereby rather than paying premiums to insurance firms, these institutions can save this money. The reduction in costs increases the wealth of the institutions hence; the school districts can spend the saved money on other projects. Self insurance also improves the plan design of how to deal with risks. The school districts can modify the risk transfer programs to cover what commercial insurers do not. It also improves loss experience whereby the school districts can account for their own losses. Furthermore, self insurance in school districts enhances cash flow, makes the workplace safe and loss settlements are paid faster than when dealing with commercial insurers.
When a school district embraces self insurance, it exposes itself to the risk that the program can cost more than if a commercial insurer took charge. Some of the disadvantages of self insurance for school districts include the poor exposure to loss experience such as poor claims experience. The school districts will also face the risk of paying more taxes since expenses of self insurance are considered tax deductible. Finally, self insurance is a burden to school districts because administrative procedure need to be established to ensure the self insurance program is efficient.
Therefore, self insurance in school districts can either make the institutions better or cause a negative impact all together. School districts must weigh the risks and make decisions on whether to adopt self insurance programs or not.
