Which of the following is NOT listed as an advantage of self-insurance?

• A. Flexibility (Avoid State Mandated Laws)
• B. Time Value of Money (Credits invested internally which produce higher rates)
• C. No Loading Charge (No premium, admin or marketing expenses)
• D. Higher operating costs due to external claims handling

Answer: (D)

Self-insurance gives a company more control over how it funds and administers risk, which brings several clear advantages. Flexibility comes from being able to design plan features and coverage to fit the workforce and to navigate certain laws or requirements more directly rather than being locked into a standard insured product. The time value of money arises because funds set aside to pay losses can be invested internally, potentially earning returns that reduce overall cost. And you avoid the loading charges that insurers typically add for admin, marketing, and profit, since there isn’t a separate insurer taking a profit and adding overhead.

The option about higher operating costs due to external claims handling does not fit as an advantage. If you outsource claims handling to external providers, that can add costs and complexity, whereas self-insurance aims to minimize those extra charges and give you more cost control. So this statement describes a drawback, not a benefit, of self-insurance.