1 run. 2. Introduction of loss prevention
1. The Swift Corporation is encouraged to embrace loss prevention
2. Swift Corporation will notice an increase in their expense savings.
3. With actual losses lower than the loss allowance in the insurer premium, Swift Corporation is bound save more money.
4. Swift Corporation will notice increase in cash flow as they have access to cash which is typically held by the insured
1. The loss allowance in the insurance premium which is saved by not procuring insurance may be less than the losses retained by the Swift Corporation, thus creating a huge volatility in the firm’s loss experience in the long run.
2. Introduction of loss prevention programs which insurer can provide at fair prices, because the expenses may be higher than imagined.
2. Identify the factors that the Swift Corporation should consider before it adopts a partial retention program for physical damage losses to company cars.
1. The company tax aspects
2. The average frequency and the level of severity of the company losses.
3. Consistency of the losses
4. The full amount of losses to be retained by the company
5. Extra cost in relation to the retention of loss like administrative issues.
6. The total past losses incurred by the company.
7. Confirm incase the management of Swift Corporation are risk averse
3. If a partial retention program is adopted, what are the various methods the Swift Corporation can use to pay for physical damage losses to company cars?
There different methods Swift Corporation can use to pay up for the physical damages. The company can approach a captive insurer to help in this case. Another option is to pay out from the current net incomes of the company. Borrowing funds from commercial lenders is also an option Swift Corporation may take into account when trying to find solution to this problems.
1. Swift Corporation should avoid employing drivers with tainted driving experiences with history of poor driving skills and accidents
2. The company needs to go level higher by ensuring all drivers undergo through a defensive driving course to reduce the losses and physical damages.