How should corporations decide when to self insure against certain risks and when to purchase insurance from outside parties?

What will be an ideal response?

Answer: Risks that are a normal part of doing business and not so large that they would lead to serious financial distress are good candidates for self-insurance. A large courier company, for example, may routinely experience damage to its vehicles or cause damage to other vehicles because of minor accidents. Such incidents are predictable cost of doing business, so the company should probably self-insure. On the other hand, an accident that involved the death or permanent disability of one of the company's drivers or of an outside party would be a low probability incident that could lead to very large financial losses, so the risk should be transferred to an insurance company.