Fully Insured

Sep 17, 2012

The most common financial method in underwriting a benefit program is the fully insured model.  When an employer is fully insured, it means that the insurance company is responsible for the entire risk. Simply put, if the insurer does not receive enough premiums over the course of the year to cover the cost of claims, the loss is the insurers and not the employers.

The advantage for the employer in being fully insured is that there is no short-term rate risk to the employer and there is more likely greater rate stability than a retention or self-insured model.

The disadvantage is a higher insured administrative charge due to the insurer bearing the risk and it may be difficult for companies to keep rates low during an inflationary environment.

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