Tired you feeling overwhelmed by increasing insurance expenses? We get it. That’s why we’re here – to simplify captive insurance and help you easily navigate it.
So, what’s captive insurance anyway?
Imagine you’re the finance expert at your company, managing those workers’ comp policies. Insurance companies set a rate that your business must pay to cover potential claims, plus their profit margin. They look at your company’s history, comparing the claims paid out to the premiums you’ve paid over time.
Here’s the thing: In the traditional insurance world, rates usually go up each year, not down. And companies like yours, with excellent safety records, end up paying for the riskier ones in your industry. Doesn’t seem fair, does it?
Let’s use examples. Organization A and Organization B offer similar services. Organization A pays out 90 cents in workers’ comp claims for every premium dollar, while Organization B spends less than half. But here’s the catch: The traditional market doesn’t really reward Organization B for their excellent performance.
So, what’s a smart Organization B to do? Enter the captive.
Think of group captives as a team of top-tier organizations focused on financial smarts and risk management. Together, they create their own insurance group.
Here’s the magic: The captive buys reinsurance to cover big losses and sets aside cash upfront to cover expected claims. That’s where the loss fund comes in. But here’s the twist: Unlike traditional premiums, what you don’t spend from the loss fund can come back to you in dividends.
And that’s not all! You also earn the investment income on your premium while it waits to pay claims. Now, that’s a game-changer.
So, if you want to control costs and reap rewards for your excellent performance, a captive might just be your ticket to insurance peace of mind.
