Partial Retention And Deductible Comparison
Partial retention is a very common risk management strategy. In Workers Compensation, partial retention is usually attained by using one of the following strategies:
- Self insurance with reinsurance in case of catastrophic claims or a bad claims year
- Small deductible program
- Large deductible program
I am not a big proponent of small deductible programs as I have rarely seen any cost savings with this type of plan. Partial retention is analogous to your car insurance deductible. If you have an auto accident, you must “throw in” your deductible to cover the damage to your own car.
The Workers Comp Community rarely uses this term. It comprises more than just a single claim retention. A group of claims or aggregate retention involves paying a group of claims like a self insured until a sum total amount of claims is reached. The aggregate retention level usually occurs at sums over $1 million or greater.
I have heard only Risk Managers use this somewhat archaic term. A normal partial retention totals $250,000 per claim. The rating bureaus consider any amount retained over $100,000 as a large retention program.
The word deductible should be used in most cases. However, one may hear or read this archaic term from time to time.
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