Pooling 101

February 16, 2024 Risk Program Administrators
Pooling 101

What is a pool?

When the marketplace doesn't have insurance options to meet a group’s specific needs (no willing insurer, sky-high premiums, meager coverage, terrible service, etc.), the group can come together to form a risk-sharing arrangement to finance and pay claims in a shared risk pool. The pool contains and stabilizes long-term costs, reduces risks and increases member safety. In short, the pool provides holistic risk management, not just insurance as a commodity.

Benefits of pooling

Financial stability

  • You pay predictable, sustainable contributions for coverage year over year, not the dramatic price swings more common in the profit-driven commercial insurance market.
  • If offers the potential to accumulate surplus for members, not private shareholders. Surplus can protect against catastrophic losses, help keep rates low and fund special risk reduction programs.
  • It permits investing resources to produce additional income. (Investment regulations and practices vary widely by lines of coverage and state rules.)

Tailored coverage

  • It offers access to coverages, term limits and services needed for critical business functions, and often includes less typical risks not covered favorably by traditional carriers.
  • Innovations for evolving risks help members manage operations.
  • Claims handling and service are specialized when coverage is triggered.

Risk management collaboration

  • A pool is member created, member owned and member focused. In short, members have a powerful voice in determining what the program does.
  • It helps create, foster and manage safe environments among members to minimize personal, physical and property damages and losses.
  • It invests in loss prevention and member education rather than just paying claims.

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