Loss control services increase decrease likelihood of

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- loss control services Increase Decrease likelihood of having to raise new funds - to pay for losses - to finance new projects Increase Decreases likelihood of financial distress - decreases expected bankruptcy costs - improves contractual terms with other claimants Increase Reduce expected tax payments - tax benefits of Insurance - ability to increase debt-related tax shields Increase The key issue in services provided by insurers is whether bundling loss control and claims processing services with an insurer’s promise to pay claims is the least-cost way to purchasing the services demanded by the firm. For a given level of quality, if the firm can obtain these services at the lower cost through an insurance policy, then the firm would have an incentive to purchase insurance apart from any value obtained from the insurer’s promise to pay claims and regardless of how well diversified their shareholders are. Adjusted Net Present Value – the net present value minus the costs associated with financing the project Financial Distress – when it has difficulty meeting its obligations and therefore has a relatively high probability of bankruptcy
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