Companies are always looking for ways to move things from the expense column to the revenue column. Often this is between difficult and impossible. There is an insurance approach that is changing the game, though. Today’s companies are embracing the basics of captive insurance, which allows companies to control their own coverage and earn profit in some cases.
Captive coverage is really quite simple in comparison to the traditional insurance industry. With “regular” insurance, a company gets a policy and it goes on about its business. If something goes wrong, the person makes a claim on their policy and potentially collects money off of that claim. The insurance company pools the risk and makes all of the profit. That insurance company also gets to control whether a payout happens at all. In these instances, companies truly find themselves in a helpless position.
Captive coverage means that the company has joined together with other companies in its industry to create a shared risk pool. The company becomes its own insurer, and it shares profits if those exist after all is said and done. This approach cuts down on the amount of money companies end up spending on their insurance needs. It also gives them more control over paying out claims. This can be quite attractive for those companies that have run into trouble with slow-paying or non-paying insurance providers in the past. Few things are more frustrating than when a company pays into its insurance policy for a long time only to find that the insurer is not willing to play fair when something bad happens.
Perhaps the best thing about captive coverage is that it allows industry experts to build insurance policies that work for the specific needs of specific companies. Insurance providers do their best to meet industry needs, but who knows an industry better than the companies that command it? These company directors know what their risks are and what they are not. With this knowledge, they are able to create their own insurance options to maximize profit margins.