With rising inflation, companies are under increasing pressure to control the cost of their commercial insurance premiums. A member-owned group captive insurance program is an excellent alternative to traditional insurance.
What is a Group Captive
A group captive is an insurance company that is owned by the members. As stakeholders, they have control over how their risk is managed. Unlike traditional insurance, where the insurance company retains the profits, in a group captive, the member company gets the profit back in the form of dividends. The result is a more cost-effective and efficient approach to managing risk.
Top Five Benefits of a Group Captive
With effective risk management, you have the potential to earn back 60-70% of your premiums. With group captives, premiums are solely based on your company’s 5-year loss history, giving you more control over your insurance costs. In traditional insurance, you are in a pool with other companies, some much riskier with high claims, and you are subsidizing their insurance premiums.
Protection from Market Fluctuation
Market fluctuations and hard markets are often caused by increased claims and decreased revenue for insurance companies. Group captives are owned and managed by their members with a strong focus on safety and offer insulation from these market fluctuations. This is especially important in a hard market where premiums are high, and coverage options are limited, making it challenging for companies to find affordable coverage and maintain their insurance programs.
Greater Control Over Claims Management
In a group captive, member-owners can participate in claims administration, which is focused on driving claims to closure and lowering costs. The third-party administrator (TPA) manages the claims process on your behalf while taking into account your input. This gives your company greater influence over handling claims and the ability to detect and deny fraudulent claims.
Risk management is a top priority in a group captive as companies recognize the link between their loss ratio and insurance premiums. With premiums based on only the company’s 5-year loss ratio, those who minimize risk and focus on claims prevention and management have a safer workplace and enjoy significantly reduced premiums.
Increased control and transparency
As a member company, you have one seat on the Board of Directors with one equal vote in the management of the group captive. This means you have a say in how the captive is run and your insurance coverage is managed. As a voting member, you’ll benefit from increased control and transparency, with more significant input into decision-making and a clearer understanding of how your insurance coverage works.
Is Your Company A Good Fit For a Group Captive
To determine if a group captive is a good fit for your company, we can do a cost-benefit analysis that includes a 5-year historical look back. We can demonstrate how the performance of a group captive compares to your traditional insurance program. Here are some other factors to consider.
- Does your company prioritize risk management?
- Has your company demonstrated a history of financial stability and a willingness to invest in its success?
- Do your premiums for workers’ compensation, commercial auto, and general liability policies exceed $150,000?
By considering these factors, you’ll better understand whether a group captive may be a good solution for your insurance needs.
In today’s world, running a successful business is about staying ahead of the competition. That’s why it’s crucial to have a long-term insurance strategy that protects your current needs and changes to address your future needs. A group captive is an excellent way to take control of your insurance costs. With our experienced team by your side, we can help you develop an insurance strategy that meets your business needs and enables you to achieve your long-term goals.