August 29, 2017
While captives have many different facets and layers to them, one thing that is left up to the captive is choosing a lawyer for when situations arise. Here’s how that is different than a standard carrier.
Standard carriers provide counsel for you in the event of a claim. Technically the lawyer should be looking out for the best interest of the insured, but will they really do that? As they are hired by the insurance company, not by you, their incentive may be to appease the company more so than make the 100% correct moves. While there are tons of lawyers that this would not be a problem what so ever, there are some that this is a problem. Which lawyer do you think the insurance carrier is more likely to continue to hire?
With a captive, the member owners hire the lawyer and choose the person they think represents their interests best. You can guarantee that they will have your best interests at heart this way and not really be working for someone else. It’s easy to see how this can lead to more favorable results.
While this is just one thing that a captive gives companies an advantage on there are many more. You can learn more about them at http://rackleyinsurancegroup.com/blog/list/ or by reading more on my LinkedIn profile. https://www.linkedin.com/in/steven-mallow-74620788/
While a captive insurer is much different than a standard insurer, the role of the broker/producer should be about the same. There are some main areas of service that go with any insured/broker relationship and most of them apply.
Service should be done proactively. There’s nothing worse than sitting around waiting for things to happen to you. I personally can’t stand that. I always believe that if you hit a problem head on, the results will not only come to you faster but they will be better as well. Proactive service can be a ton of different things in the insurance world. Maybe midway through the policy you want to have an “automobile audit” where you go through and make sure that every auto is scheduled and there are no holes there. A “driver audit” would look very similar to the auto audit. The options are endless but the process is the same. Agree ahead of time to meet at a certain date and take care of something that is important to the insured.
A common service provided to insureds is making sure they are in the best market available. While this may apply to the property side of things (property isn’t always included in captives), this may not apply to the liability portion that is in the captive. Your broker should be looking for carriers with strong financial standings and that have unique coverage options or policy term lengths. Most likely you will love the captive so there will be no need to see what is out there in the standard market for the liability portion.
While it seems like not much to expect, these things are critical in your guidance of your insurance program. I technically only listed two things but the proactive services are a huge undertaking. That piece can and should be shaped to exactly what the insured needs. The peace of mind, of knowing when to expect the broker as well as what to expect from him or her can foster a relationship that can span a career.
July 27, 2017
If you have read my previous articles you would now know why or why not a captive is for your company. Having said that, not everyone qualifies. There are certain areas that a company must be strong, in order to be placed in a captive.
One of the biggest factors in qualifying for a captive would be premium volume. In most cases the worker’s compensation is the main policy that is placed in the captive. The other two that can often be placed in a captive are the auto liability and the general liability. The combined amount of premium needs to be in excess of $100,000. Some captives will even require higher premiums.
Another key factor in qualifying for a captive is having a solid loss history. Loss history doesn’t have to be perfect or completely without fault but it needs to be good. These are large corporations we are dealing with here, they are likely to have some claims but they need to be below the industry average. A company who has had above the industry average of claims for four of the last five years will most likely not be a good fit.
Companies need to be in an industry that is not susceptible to extremely high amounts of risk. If you are a firework wholesaler or a gun manufacturer then you may find it hard to be placed in a captive. Since members of the captive get to vote on who is let in and they all share in the profitability of the captive it isn’t always in their best interest to accept high risk companies. This particular qualification is not set in stone and members can vote to approve any company they want. The higher risk companies are still less likely to get approved.
Collateral is also important. Since captives place some of the risk on the insureds they need to be able to withstand some hits. A company that is not in good financial standing could cause the other members of the captive to have to pick up some of the slack. So naturally this can be a disqualifier for some businesses. Each captive will have a collateral requirement that each member has to post to help the captive stay financially stable as well as ensuring the member is financially stable.
The reasons listed above are some of the main factors in whether or not a company would fit in a captive. There has to be a high enough premium volume, low loss ratios, be in the right industry, and have the financial backing to qualify for a captive insurer. If you are wanting to learn more about captives check out the blog at www.therackleygroup.com or check my other articles on LinkedIn.
July 24, 2017
Steven Mallow - Captive Division Leader for The Rackley Group
Captives are unlike the standard market in several ways. Some of those ways may be good and some may be bad, depending on your situation. The following are three reason why a captive is not for you.
If you are a risk adverse person or company then you don’t want to be in a captive. As the member-owner of the captive you take on the first layer of your losses. The very first dollar of the loss is coming out of your pocket, not the insurance company’s. By being in a captive, the amount of financial risk that you take on is higher. Standard market carriers take on the first dollar of liability losses in most cases which equates to less risk for the insured.
Company culture plays a big role in a company's success. It also plays a role in how the employees behave. That brings us to workplace safety. If you haven’t invested in company culture and loss prevention, then a captive is most likely not the place for you. Since you are more likely to have losses on your worker’s compensation policy as well as your general liability policy you wouldn’t want to be the one footing the bill. Since captive premiums are based off of your company’s actual losses and not everyone else’s, the potential for rate increases is high.
The third reason you don’t want to be in a captive is that some industries aren’t the best fit for one. As we all know certain industries are more prone to losses than others. If you are not afraid of the risk and you are dedicated to loss prevention but you still see high loss ratios then stay away from captive insurers. Why pay the first portion of losses if you already know there will be a high amount of them?
These are three reasons that a company might stay away from a captive. If these don’t describe you or your company and you want to learn more about captives and their benefits, check out the blog at www.therackleygroup.com or look at my other articles on Linkedin.