Adequate insurance coverage for companies, especially those in high-risk industries, can be difficult to find or afford as providers opt to back out instead of underwriting the industry risks. There is a third option, however, in group captives. A group captive is a collection of companies that form an insurance facility together and spread the risk between them.
When you purchase an insurance plan from a traditional company, you are paying for that company’s overhead and profit in addition to the cost of what is covered. With group captive insurance, you are paying into a fund that covers a portion of the risks for the whole group as well as the program management. This is designed to lower costs and enhance the bottom line of your company because the program overhead is minimized, and any profits are shared by the group.
Investment Income and Potential Dividends
The premiums that you pay with group captives often gain interest during the year and you have the potential to receive dividends at the end of each cycle. This can increase the benefits of safety measures you put in place because the fewer claims paid from the captive, the higher your dividend. While the risks taken by each company in the group are greater, the chances of all members having a bad year are low and can be minimized by high admission standards.
Greater Control of Program Management Vendors
With a group captive, you can have greater control over the program. You can work with the group to expand coverage, cut costs and admission standards to further reduce risks and control how safety-conscious the members are. You can even have more control over the choice of counsel for claims and better tailor your coverage to meet your actual risks.
Group captives can help turn insurance coverage into an income source while giving you better control and lower costs than traditional plans. This type of insurance can also help you find industry specific coverage that is too expensive or unavailable from popular carriers.