Certified Professional in Health Care Risk Management (CPHRM) Practice Exam 2025 - Free CPHRM Practice Questions and Study Guide

Fronting in the context of insurance specifically refers to the practice of using an admitted insurer to issue a policy for a self-insured entity. This arrangement typically involves the self-insured entity purchasing a policy from a licensed or admitted insurer, which in turn enables the self-insured entity to meet regulatory requirements or give the appearance of insurance coverage without transferring significant risk to the insurer.

In this scenario, the admitted insurer provides formal insurance documentation, often for liability or regulatory purposes, while the primary risk is retained by the self-insured entity itself. This method allows the entity to take advantage of certain market conditions or regulatory structures while still being recognized as a fully insured entity from a technical standpoint.

This practice is particularly relevant for large organizations that are capable of assuming substantial risk themselves but require a façade of insurance for compliance or operational reasons. It is distinct from simply transferring all risks to an insurer, which does not apply in a fronting arrangement. It also differs from the collection of premiums or implications of fraudulent practices, as those concepts operate under different principles and regulatory frameworks within the insurance industry.