The Swift Corporation has 5000 sales representatives and employees in the United States who drive company cars. The company's risk manager has recommended to the firm's management that the company should implement a partial retention program for physical damage losses to company cars. a. Explain the advantages and disadvantages of a partial retention program to the Seift Corporation. b. Identify the factors that the Swift Corporation should consider before it adopts a partial retention program for physical damage losses to company cars. c. 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?d. Identify two risk-control measures that could be used in the company's partial retention program for physical damage losses.

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Explanation:

The Partial retention program is a risk financing expression which id often used by companies in retaining a part of the risk and in transferring of the remaining part.

The advantages and disadvantages of a partial retention program to the Swift Corporation are mentioned below:

Advantages

• Stability of Insurance cover

Partial retention program would enable car owners to know more accurately about the vehicle's insurance cost and the helps them to plan the their car expenses accordingly

• Retained Profits

Risk retention groups would allow policy holders to retain their profits than being passed to a commercial insurer.

• Insured interest

As the markets are uncertain, car owners are likely to be at risk. In such a situation, they would be more receptive in implementing loss control measures that would help in improving the future losses and reducing insurance premiums

Disadvantages

• Shared information

it may be possible that company owners may not want to share their personal details about their own businesses with other parties

• Re-entry into the market

it may happen if Risk retention group fails then reentering the commercial insurance market can turn out to be more expensive with less broad coverage.

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