Grasp the differences in insurance provision between alternative and traditional learners.
You would be forgiven for shying away from getting captive insurance for your firm if only because it seems overly complex. The truth is, with the right firm working with you, you will be able to make huge savings on premiums, should you make that switch.
We examined some of the key differences that set traditional insurance and captive insurance apart.
The 4 Key Ways Traditional and Captive Insurance Differ
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Here are the 4 outstanding ways in which traditional and captive insurance companies differ.
1 – Profits are Reinvested
When you opt for a captive insurance firm, any surplus in premium profits is simply invested back into the company. There will be a pre-approved investment portfolio from whence the organizers can pick areas to invest in, ultimately generating more profit for all involved. The longer this rolls over for, the more money you save on your premiums.
Needless to say that the profits are paid to the CEOs when you choose a traditional insurance firm. We are pointing no fingers but we know it goes to executive bonuses rather than actual claimants.
2 – Captive Participants Have Better Control
Which leads us to the second key difference between the two. When you are in a captive cell insurance company, you are in full control of both the claims handling process, and of that investment portfolio. It operates more like a democracy between you and the other members of your cell, where you would have no choice in some matters, were you part of a traditional insurance provider’s policy.
Greater control over things like claims means you aren’t negotiating with a third party. You are simply able to step up to the plate and make your own offers, using your own legal team. That’s far more appealing than waiting months to have decisions go against you with little you can do about it.
3 – Cost Management Vs Profit Creation
When you go to an insurance firm to buy coverage for your business, you have to shop around to find the best deal. Why? Because you want to mitigate some of those losses by finding the provider with the best coverage for the cheapest price.
When you opt for a cell captive insurance firm, you get a more affordable price, but it goes a step farther than that. You are able to make investments with the surplus premiums paid, essentially creating your excess profit out of an area that would have otherwise been written off as a loss. We think that’s pretty effective for any policy, and a primary reason more and more SMEs are turning to captive insurance.
4 – You Choose Policy by Components
Arguably the best thing about self-insurance is that you are in charge of unbundling on your firm’s behalf. What does this mean? That you can ‘unbundle’ insurance premiums down into their separate parts, and only pay for what you need.
So say you need public liability but a traditional policy also includes legal representation. With a captive insurer, you could strip the legal representation out of the equation and save money on your premium.
In short, Captive insurers will let you pick and choose what you want to work with. We don’t think you will find a fairer deal than that.