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Self-Insuring: What You Should Know

Self-Insuring: What You Should Know

The sharing economy has changed the way that businesses and individuals look at the world. If you need a ride you may no longer hail a cab, but use an app on your phone to call a car. If you have unexpected expenses, you may sign up for a crowd funding site. If your business seems too small to get insurance, you may band together with other small businesses to get insurance for your group. This outside the box thinking, while admirable, does present some challenges when it comes to insurance and those unexpected expenses it is meant to cover. Underwriting Can Be Tricky A number of crowd-sourcing type self-insurance vehicles have begun to hit the market in response to increasing health insurance premiums. These can be used an alternative to traditional health care plans, and may even fulfill the Affordable Care Act requirement for insured individuals at a reduced cost. What’s not to like about that? Many of these programs have strict application requirements, which are submitted online. Applicants are pooled into groups with like individuals: similar age, similar health status, certain activity levels, etc. Premium investments are dependent on these factors, so some applicants may fudge the numbers a bit in order to qualify for lower cost. The pool of resources in these groups is significantly smaller than that of an insurance company, which may not be underwriting the group coverage. Dishonest individuals make the same small payments as everyone else, but use far more of the resources. They may eventually be found out, but have used more than their fair share of the premium pool, causing...