Many larger companies self-insure. They still pay a traditional insurance company to handle the claims process and negotiate with providers, but they get a discount for taking on the risk themselves.
I wonder, is 2 premature babies in one year in a 5,000 person company very unusual? Did their actuaries just do a horrible job? Or is that really a truly extraordinary event for a company their size?
Reminds me of when I balked at my home insurance company trying to bump my rates 20% one year- they said it was because of the 2011 Japan earthquake (I'm in Canada). I laughed and walked right out.
You're presuming their decision to self insure was based on an actuarial assessment.
From my experience, it's also plausible that some poor schlep in the accounting department was tasked with looking into self insuring, and created a not-very-robust risk model. At AOL's size one would hope an actuary was involved, but that may not be the case.
As well, even if am actuary was involved, that doesn't stop upper management getting peeved when payouts are towards the upper bound of the model, as all they likely saw was the potential cost savings of the lower bound of the model, not the full risk.
Yes, and it also doesn't stop people from quitting AOL and AOL being unable to retain employees (which seems to be happening due to this and other issues caused by AOL's leadership).
