Theives have left more than 3 miles of trails dark and cost the city hundreds of thousands of dollars.
"The city is self-insured, but we have to pay a deductible just like anyone else, so it hits taxpayers," Parks Maintenance Manager Kris Kircher said.
I don't get it. When a city self-insures, that means that the city doesn't take out an external insurance policy against the risk. This avoids paying insurance premiums, but it leaves the city (and therefore, the taxpayer) directly vulnerable to the full cost of the loss should it occur. So the city doesn't have to pay deductibles like anyone else. It absorbs the full cost of the loss.
For example, I could choose to self-insure against potential damage at my apartment. There's no law requiring renter's insurance and no requirement of it where I live. If I self-insured, I would pay no insurance premiums. But if damage were to occur, I wouldn't pay deductibles like anyone else -- I'd have to experience the full cost of the damage without insurance to cushion me from it. Instead, in actuality, I do have renter's insurance.
In the long run, on average, having insurance and paying premiums is more costly than not. This is how insurance companies make money -- they make more money from investing the premiums than they pay out in claims. Insurance is a mechanism for distributing risk -- by all policy holders incurring some "loss" in the form of predictable premiums and deductibles, individual policy holders avoid concentrated local risk, sharing it across all policy holders.
It can make sense for municipalities and governments to self-insure -- they may be large enough that the odds are achieved and they're better off avoiding the overhead of insurance. But self-insurance has little to do with deductibles. Something is confused in this reporting.
I posted a comment about this on the Arizona Republic article. Maybe if I check back in a while there will be an answer.
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