When to Consider a Loss-Sensitive Casualty Program Structure

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Most middle-market companies have guaranteed-cost programs for primary casualty insurance. In these programs, also called first-dollar programs, you pay a fixed premium in exchange for full coverage of a loss, including damages, defense costs, claims handling, and other costs.

Companies have historically preferred the convenience and budget stability of these programs. Plus, the entire premium is a potential tax deduction, there are no collateral requirements, and the insurance company is somewhat motivated to help you control losses.

However, times have changed. Today, during this tightening market, insurance companies’ capacity for these programs is decreasing and premiums are increasing — especially for workers’ compensation due to a number of factors — which is creating volatility in pricing from one year to the next. As a result, many companies are considering a loss-sensitive program instead.

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