If you pay attention to trends in insurance coverage, costs, and availability, it’s hard to miss that captive insurers have become very popular over the last half decade or so. The phenomenon is seen across almost every industry sector, and it affects everything from liability and property damage policies to employee health insurance.
For a business owner on the outside just learning about this, it can be a little confusing to understand what is driving the move. It helps if you realize that captive insurance is an opportunity to control your costs when you have the money to start an insurance company whose reason for being is to provide you with a policy. It’s a little more complex than self-insurance, but it also has a lot more opportunity for savings than direct self-insurance.
Group Ownership Means Shared Risks
Captives have been around for a long time, but until the rise of brokers offering to set up group-owned captive companies, they were only an option for businesses that could essentially afford self-insurance anyway. Places that saw a rise in availability for group captive insurance because brokers began operating to put companies together saw wider adoption, until the rise of captive brokers provided a path to coverage for many small businesses and medium-sized companies who would not have had the resources to fund a single parent captive business.
Choose Your Coverage and Options
Many companies who opt for group captive insurance do so to save on specific policies because a captive can deliver them below the rate they’d find on the open market. Depending on the size of the company and the coverage options, this can be anything from industry-specific liability and loss protection to comprehensive employee health care that costs less than major plans while offering superior coverage.
A lot depends on your business. You can choose to have a captive cover as much or as little of your insurance needs as you like. Just remember that the more areas your captive provides coverage in, the more robust their finances will need to be to operate smoothly.