January 18, 2018

How Self-Insurance is Transforming the Risk Management Framework

Today’s Risk Management Framework has rapidly evolved from a static to-do list of compliance issues to a dynamic science. Risk departments aren’t just making sure your coffee cup is covered while walking through the office; they’re predicting the future and making sure bad things don’t happen.

Of the many causes behind this shift, one major player is the evolution of the insurance industry.

Complex Risk

Due to the rapid pace at which our world is changing, the kinds of risks any given business faces become increasingly unique to the business. The “mass production” of insurance policies does not meet every need in the market. Even as large carriers diversify their coverage, these big companies do not possess the agility to keep up with the unpredictable and constant change in the risk landscape.

Gap in the Market

Organizations require alternative ways of transferring risk to cover specialized and complex risks. As a result, the self-insurance sector continues to gain momentum as a go-to solution. Solutions captives, risk pools, and other non-traditional self-insurance.

New Trends

Self-insurance has held its ground, as one study¹ shows, with a steady growth trend over the past 20 years—and a new way of doing risk management has emerged along with it.

Self-insureds, as the term implies, “own the risks.” While most companies will have to hire third parties for administrative tasks, claims, underwriting, and risk control, this structural change has some major implications. The insured has C-suite influence in the operations of the self-insured client(s). The third-party plan administrators, underwriters, etc. must know and meet the needs of their client as if the client was the boss—because the client is the boss.

This shift in structure has led to insurance solutions that aim to:

  • Evolve quickly with the changing demands of clients.
  • Proactively integrate risk management into daily operations as an essential means of mitigating risk.
  • Integrate technology and data capabilities to keep a competitive edge.
  • Have a high level of accountability to the needs of the insured.
  • Consistently improve upon the risk management process to see results.

While the risk will continue to change with the times, the common denominator emerging from this sector is a new approach to risk management—one that is agile, client-focused, proactive, and efficient. This sector has, due to its very structure, a need to constantly evolve in order to survive. It is therefore, well positioned to lead the way in risk management and create a higher demand for better risk management services.

Today’s risk framework focuses less on dealing with negative situations as they come and more on reducing the likelihood of the negative events happening in the first place. Furthermore, it has begun to ask how to create a culture and systems that act as a buffer to lessen the severity of those unpredictable and unpreventable anomalies.

Risk management is a critical science in today’s world. Due to the evolving Self-Insurance market, we are learning to move away from just surviving, into a future where we aim to see businesses, and the people in them, thriving.


¹EBRI Study